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Checklist for Self-funded Group Health Plans

Group health plans are subject to an ever-changing environment of regulations surrounding compliance and notice obligations. Many of the requirements apply equally to both insured and self-funded arrangements, and the insurance carrier often ensures compliance with certain items. This checklist provides an overview of the obligations for self-funded group health plans. Employers sponsoring self-funded plans should monitor these requirements closely and ensure that they comply with each of the items discussed below, or that they have appropriately delegated the responsibility to a third-party service provider (such as a claims administrator, COBRA administrator, accountant or other service provider).

It is important to note that “level-funded” plans are self-funded plans with a more stable funding arrangement than a traditional self-funded plan. As a result, the items discussed below apply to level-funded plans as well as other types of self-funded arrangements.

  • Plan Document (or Wrap Document). Plans that are subject to ERISA must be established and maintained pursuant to a written plan document. The plan document is not required to be distributed, but a copy must be furnished to participants upon written request.

(Helpful Tips: The plan (and any amendments) should be properly adopted by the plan sponsor AND signed by an authorized individual.)

  • Summary Plan Description (SPD). Plans that are subject to ERISA are required to maintain an SPD and distribute it to participants. Note that third party administrators (including insurers acting as third-party administrators) of self-funded plans may not provide the employer with an SPD, so the employer may need to prepare the SPD themselves or engage a third party to prepare it.

(Helpful Tips: Employers should follow the ERISA delivery requirements for SPDs and other required benefit notices. During a DOL audit, an employer may need to prove that its delivery methods and procedures were appropriate.)

  • Summary of Material Modifications (SMM). Any material changes to plan design or operation must be communicated to participants within prescribed time limits. These changes can be communicated either by distributing an updated SPD or an SMM.

(Helpful Tips: Employers should communicate plan changes to participants as soon as reasonably possible to help avoid benefit disputes. Plan changes may take effect at the beginning of the upcoming plan year and employers may decide to include an SMM in their open enrollment materials.)

  • HIPAA Privacy & Security. Self-funded health plans typically have greater responsibility for complying with the HIPAA privacy and security rules than fully insured plans because, for fully insured plans, much of the responsibility for complying with HIPAA falls on the insurance carrier. Ensuring compliance with the HIPAA privacy and security rules will require, among other things, appointing privacy and security officers, establishing written policies and procedures, conducting a security risk assessment, developing breach notification procedures, entering into Business Associate Agreements, training the workforce, and distributing a Notice of Privacy Practices.
  • Medicare Part D Notice of Credible (or Non-Credible) Coverage (NOCC). Employers with group health plans that provide prescription drug coverage must determine whether their drug benefits are “creditable” or “non-creditable” (as compared to coverage under Medicare Part D). They also must notify Medicare-eligible individuals and the Centers for Medicare and Medicaid Services (by online filing) annually of the plan’s creditable or non-creditable status.
  • COBRA. Employers must prepare and distribute a variety of different COBRA notices to certain individuals at prescribed times. They also must administer COBRA continuation coverage, although most employers elect to hire a third-party COBRA administrator rather than handling it themselves.
  • Other Employee Notices. Other required employee notifications include SBCs, HIPAA special enrollment rights, CHIP, NMHPA, WHCRA, MHPAEA, GINA, ACA patient protections and grandfathered plan status, and ERISA claims/appeals and external review. (Note that some of these notices may not be applicable for certain self-funded plans.)
  • Form 5500. Plans subject to ERISA must file a Form 5500 annually if they have 100 or more participants at the beginning of the plan year. A Form 5500 is required for plans of any size if they hold “plan assets.” (In addition, insured plans and self-funded plans with “plan assets” must distribute a summary annual report (SAR) summarizing the Form 5500 to participants annually.)
  • PCORI Fee. Self-funded group health plan sponsors must calculate, report, and pay an annual fee to fund the Patient Centered Outcomes Research Institute (PCORI). The PCORI fee is temporary-it will not apply to plan years ending after September 30, 2019. Note that HRAs offered in conjunction with fully insured group medical plans are subject to the PCORI fee.
  • Nondiscrimination Rules (IRC Section 105(h)). The Internal Revenue Code imposes non-discrimination requirements on self-funded group health plans. These rules are designed to ensure that self-funded plans do not impermissibly favor highly compensated individuals in terms of eligibility or benefits. It is generally recommended that self-funded plans test for discrimination at least annually, although more frequent testing may be needed in some circumstances.
  • Code 213(d) Medical Expense Exclusion. While some employers self-insure their health benefits to give them more flexibility over plan design, they should nonetheless be reminded that only medical expenses under Code Section 213(d) may be paid or reimbursed on a tax-free basis. Plan sponsors should monitor claims administrators to ensure that only claims for qualifying medical expenses are paid by the plan.
  • ACA Reporting (Forms 1094 and 1095). Code Section 6055 requires employers with self-funded health plans to provide a Form 1095 to plan enrollees each year, and to file a Form 1094 with the IRS (along with copies of the 1095s). Self-funded plan sponsors that are not “applicable large employers” (ALEs) use IRS Forms 1094-B and 1095-B to meet these reporting obligations. ALEs that sponsor self-funded health plans use IRS Forms 1094-C and 1095-C.
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