Module 7 Administration and Communication Requirements Flashcards
What groups must receive communications and reports associated with benefits plans?
Management
Plan Participants
Regulatory Agencies
Is benefits reporting and communication to management required by regulation?
Although there is not any legally required communication with management, it is crucial to make them aware of the effects regulatory or tax changes have on benefits plans, especially since benefits are such a large part of human capital costs.
what are the 3 primary communication topics about benefits changes that should be communicated to management?
Present Changes - Present ramifications of compliance (as well as non-compliance) to senior leadership and make sure they are aware of the legislation or regulation, the process for compliance (such as board resolutions, plan amendments or contract addendums), and its impact on the company financially and otherwise. If necessary, communicate potential alternative solutions to management.
Describe Impact - How employees will see the change
Produce Reports - If records are properly maintained, it will be easier to produce
periodic and ad hoc reports when required.
When benefit changes occur due to regulatory impact - what are the 3 primary considerations that should be included in analysis of the change?
Cost
Practical Implementation
Perceived value to the employees
What documentation does ERISA require to be communicated to employees?
Summary Plan Descriptions (SPD)
Define a Summary Plan Description as it pertains to ERISA reporting to Employees - What does it contain?
An explanation of what a benefit program provides and how it works, including:
– When an employee can begin to participate in the plan
– How service and benefits are calculated
– When benefits become vested
– When and in what form benefits are paid
– How to file a claim for benefits
Under the Pension Protection Act of 2006 (PPA) how often are DC plan administrators required to provide benefit statements?
what must be provided in the benefits statement?
- Quarterly, if the plan’s investments are participant-directed
- Annually, if the plan’s investments are not participant-directed
Must include:
1. Account value
2. Vested portion
3. Explanation of the importance of diversification
4. Plan integration rules, if applicable
5. Cross-reference to the DOL website
6. As required by the PPA, the DOL provides models of benefits statements
Name the 4 documents required to be delivered to regulatory agencies.
What are the 4 Audits required to be delivered to regulatory agencies?
Documents:
Summary Plan Descriptions
Summary of Material Modifications (SMMs)
Summary Annual Reports (SARS)
Form 5500 Series
Audits:
IRS Audits
HIPPA Audits
DOL Audits
Sarbanes-Oxley Audits
What 5 disclosures must be provided in the Summary Plan Description?
- Contact information for who developed and administers the benefits plans
- Disclosure of employee rights in ERISA
- Criteria for employee eligibility or loss of benefit
- Claims procedure and appeal process
- Describe if protected by PBGC
What is the description and purpose of the Summary of Material Modifications (SMMs)?
■ Description — A summary of significant changes in the provisions of a plan or in the
administration of the plan; an amendment to the SPD.
■ Purpose — A material modification exists when there is a change to any of the required information disclosed in a summary plan description.
What is the description and purpose of Form 5500 Series?
Description:
Form 5500 Series is the Annual Return (Tax Return) / Report of employee benefit plan and any required attachments.
Purpose:
* A compliance, research, and disclosure tool for the Department of Labor
* A disclosure document for plan participants and beneficiaries
* A source of information and data for use by other federal agencies, Congress, and the private sector in assessing employee benefit, tax, and economic trends and policies
What is the Description and Purpose of the Summary Annual Reports (SAR)?
Description: A synopsis of some of the information that is also reported on an annual Form 5500 tax return
Purpose — To communicate financial information related to benefits programs to participants
What is the description and purpose of IRS Audits?
What is the role of HR?
■ Description — The Internal Revenue Service (IRS) conducts nondiscrimination testing to ensure organizations are in compliance with the qualification rules established by the Internal Revenue
Code (IRC).
■ Purpose — With many qualified benefit plans providing tax-deductible contributions to employers and tax-free or tax-deferred benefits to employees, the IRS audits organizations’ benefit programs to ensure organizations meet the requirements for beneficial tax treatment.
■ Role of HR — Maintain all necessary plan documents, reports and financial information to facilitate auditor requests
What is the Description, Purpose, and role of HR regarding HIPAA Audits?
■ Description — Organizations are required to conduct periodic audits to evaluate processes and procedures for securing confidential health information.
■ Purpose — The purpose behind the audit is to determine if an organization has properly documented administrative, physical and technical security practices, policies, and procedures and generally meets the requirements of the rule.
■ Role of HR — Maintain HIPAA processes and procedures to facilitate auditor requests
What is the Description, Purpose, and Role of HR regarding Department of Labor Audits?
■ Description — A DOL audit is a look at the past performance of an entity, program or function to determine whether funds were properly administered and whether the projects have met or fallen short of program intent and expectations.
■ Purpose — The purpose of the audit is to attest to management’s representations in financial statements. An auditor’s report on employee benefits plan financial statements is generally included as part of the annual reports required by ERISA standards. The audit is not only done to examine financial operations, but also includes:
* Reviewing compliance with applicable laws and regulations
* Evaluating economy and efficiency of operations
* Evaluating effectiveness in achieving program results
■ Role of HR — Maintain
What is the Description, Purpose, and Role of HR in Sarbanes-Oxley Audits?
Description — The Sarbanes-Oxley Act of 2002 (SOX) requires all financial reports to include an internal control report for public companies.
* Year-end financial reports must contain an assessment of the effectiveness of the internal controls. The issuer’s auditing firm is required to attest to that assessment.
* The auditing firm does this after reviewing controls, policies, and procedures during a
Section 404 audit, conducted along with a traditional financial audit.
■ Purpose — To protect investors by improving the accuracy and reliability of corporate disclosures according to the securities laws.
* It is intended to not only show that a company’s financial data is accurate, but also that the company has confidence in them because adequate controls are in place to safeguard financial data.
* It protects shareholders, employees and the public from accounting errors and fraudulent financial practices.
■ Role of HR — Maintain all necessary reports and financial information within scope of responsibility to facilitate auditor requests. Record-keeping for HR is key in SOX compliance.
- Which one of the following best describes why benefits professionals should present regulatory changes to management?
A. HR is legally required to communicate regulatory changes to management.
B. Not reporting changes will result in termination.
C. Benefits are a large part of human capital costs.
C. Benefits are a large part of human capital costs.
- Which of the following laws requires employers to notify employees of loss of group health coverage?
A. Family Medical Leave Act (FMLA)
B. Health Insurance Portability and Accountability Act (HIPAA)
C. Consolidated Omnibus Budget Reconciliation Act (COBRA)
D. Newborns’ and Mothers’ Health Protection Act (NMHPA)
C. Consolidated Omnibus Budget Reconciliation Act (COBRA)
Which of the following filings provides a summary of significant changes in the provisions of a plan?
A. Summary Plan Description (SPD)
B. Summary of Material Modifications (SMM)
C. Summary Annual Report (SAR)
D. Form 5500
B. Summary of Material Modifications (SMM)
Which of the following audits consists of evaluating processes and procedures for securing confidential health information?
A. DOL audit
B. HIPAA audit
C. Sarbanes-Oxley audit
D. CPA audit
B. HIPAA audit
