The proposed regulations and penalties associated with income non-discrimination are anticipated to be extended to include fully-insured, non-grandfathered group health insurance plans. The penalties for non-compliance could be substantial.
As the U.S. Department of Labor (DOL) steps up their compliance visits, it’s important for employers to be proactive in managing their risk. It is estimated that 95% of all employers would fail a DOL audit today. Goals set by the DOL are to audit every employer by 2018. Gone are the days when the DOL would simply send a letter of inquiry!
Plans must provide substantive benefits for rank-and-file employees, not only for business owners and managers. These requirements are referred to as non-discrimination rules, and cover the level of plan benefits for rank-and-file employees compared to owners/managers. Under a qualified medical or retirement plan, contributions or benefits provided under the plan must not discriminate in favor of “highly compensated” employees.
“Highly compensated employees” include the following:
To be considered “non-discriminatory”, the plan must pass two tests:
1. Eligibility test (must pass one of two options):
2. Benefits Test:
Discriminatory plans are subject to an excise tax of $100 per day, per employee discriminated against, up to a maximum of $500,000. The penalty threat is a real one. It’s up to you whether you want to be proactive and manage your risk or be reactive and potentially spend significant dollars in fines.
Previously the non-discrimination testing only applied to self-insured groups. However now this applies to all types of plans, even those with fewer than 50 employees. Going forward, employers need to be proactive and willing to invest in the tools to keep themselves compliant.
If this is a concern to you, Provider Group has the expertise to help you navigate these and other compliance issues. Contact Jamie Moran, HIA, MHP, Principal and Director of Employee Benefits at Provider Group. Jamie can be reached at 401-671-6359 or firstname.lastname@example.org.
Jamie Moran is a Principal, and leads Provider Group’s Employee Benefits Practice. He designs and implements cost effective, long-term benefits strategies while balancing the employee’s demand for quality plans. Jamie works with businesses and non-profit organizations throughout New England to develop a variety of traditional and non-traditional ways to approach employee benefits.