The President's Corner *
John P. Foran, President/CEO, LIA, RHU

Quality, Commitment, Innovation

In these troubling times of healthcare cost escalation, there is one thing that clearly differentiates the EBS Foran Group from our competition and that is the commitment we have to our Clients to provide quality and innovative solutions to the challenges presented in this most difficult marketplace.

Over the past few months, some of our Clients have commented about the articles and inquiries being presented by the Attorney Generals in Massachusetts, New York, Florida and Connecticut about "bid rigging" and other unscrupulous practices by brokers and consultants in dealing with Employee Benefit programs. I want to take this opportunity to assure each and every one of our valued Clients that our Organization has never participated in any such practice. In fact, a major hallmark of our success are the testimonials we have received from our Clients, in both the Public and Private sector, attesting to the great lengths that we go to so as to ensure that each Client receives the optimal benefits possible within the cost parameters each Client has established.

Although in some circles it may be in vogue to view entities such as ours as being a "part of the problem rather than part of the solution", we feel that we are completely the opposite and that our history of pro-Client activities supports this position.

If we look at some of today's Employee Benefit acronyms, such as ERISA, HIPAA, COBRA, FLMA, MSP, TEFRA, as well as many, many others, and then consider the plethora of terms employed in the managed care marketplace, including HMOs, PPOs, POS plans, MSAs, HSAs, HRAs, High Deductible plans, Consumer Driven Healthcare Plans and the like, it becomes most apparent that no individual Employer can stay fully abreast of what's transpiring in today's complex marketplace. Add to that the regulatory requirements of handling PHI, The Working Families Tax Relief Act of 2004, USERRA, as well as the abundance of other laws and regulations, and couple all of these with sound risk management practices, including evaluating insurance providers, benefit plans and funding mechanisms (fully insured, self-insured, minimum premium, as well as the hybrid programs in between), it becomes obvious an Employer needs an advocate.

At the EBS Foran Group we believe we are more than an advocate; we believe we are in "partnership" with our valued Clients. We believe that through our tenacious actions and our expertise in underwriting (reference that Edd Byrnes and Ken Lombardi have recently passed the Massachusetts examination for a Licensed Insurance Advisor to join myself as Insurance Advisors) our in-depth experience and knowledge of the marketplace make our position in the complex field of Employee Benefits unparalleled.

Although the marketplace has changed, and we suggest that you review our enclosed articles about the same, we believe that our aggressive position as being the advocate for our Clients certainly serves each and every one of our Clients individually, based upon their specific needs, in the most positive way possible. Simply stated, we believe that we offer not only expert advice and guidance in this complex world of Employee Benefits, but we also work aggressively to ensure that our Clients do not receive the "first pass" in renewal rating but are assured of the most aggressive rate possible. We also thoroughly research the market at the point of renewal (and sometimes off renewal predicated upon a Client's specific circumstances) to ensure the carrier/vendor, benefit schedule and funding mechanism is the most appropriate for each particular Client.

Is their value added? We believe there is, and that is why we take exception with being painted with a brush that suggests that we are simply part of the problem and not part of the solution!

We believe that we know our Clients well, we know your individual needs and we know your ultimate benefit solutions, although we recognize that not everyone can get from Point A to Point B in the short-term without developing a strategic plan. Our forte is in developing strategic plans and knowing what to do and when. We cannot control "trend" (i.e. - healthcare inflation), and we cannot stop expensive claims from happening. However, with our experience, knowledge and vision we can work with each Client to develop the optimal solution to your specific needs and challenges.

Whether you are in the business of making "widgets", or Higher Education, or Healthcare, or Government or in any other Business sector we proudly serve, strive to be the best in your field and rely upon our Organization as your partner to ensure your benefit needs are in good hands.

We appreciate your continued confidence in the EBS Foran Group, and my personal assurance to you is that we will not let you down.

I'd also like to take this opportunity to recognize the Hyde Group, located in Southbridge, Massachusetts, as our featured Employer Group. Our office has been working with the Hyde Group for more than two decades, and they are truly one of the Premier Manufacturing entities in the entire United States. We are privileged to call them our business partners.

In closing, I'd like to recognize Meagan E. Foran as our featured Employee in this edition of our Newsletter. Meagan has become a most positive influence for our entire staff during her tenure with EBS Foran and for those of you that have met her, I'm hopeful that you will agree!

Lastly, let me again thank you all for the opportunity to be of service to you. If you appreciate our services, please tell someone else, as referrals are always greatly appreciated. If, for whatever reason, you are not fully satisfied with our services, please tell me personally so that I may do whatever is necessary to resolve any areas of concern you may have.

We look forward to working with you during the 2005 renewal season, which is already underway with great intensity!

Sincerely,

John P. Foran, LIA, RHU
President/CEO

* This Newsletter and the articles that appear in it are purely informational in content and character and are not meant or intended to be in the nature of advice or legal counsel. The invitation to contact individuals of EBS Foran is not to be construed as a solicitation for business or insurance services in any State or jurisdiction in which the individual is not licensed as an Insurance Agent or Broker.

By Alden J. Bianchi, Esq.*

Effective as of January 1, 2005 , the Working Families Tax Relief Act of 2004 (the “Act”) rewrites Internal Revenue Code §152's definition of “dependent” to mean either (i) a “qualifying child” or (ii) a “qualifying relative.”

• A “qualifying child” is a daughter, son, stepchild, sibling, or stepsibling (or descendent of any of any of these) who has the same principal place of abode as the taxpayer for more than one half of the taxable year and who (other than in the case of total disability) has not has not yet attained a specified age.

• A “qualifying relative” is a person who is not a qualifying child and who (i) has the same principal place of abode as the taxpayer for more than one half of the taxable year, (ii) receives more than half of his or her support from the taxpayer, and (iii) has gross income for the year in excess of the Code §151(d) exemption amount ($3,100 in 2004).

At stake here is whether benefits provided to domestic partners, same-sex spouses and individuals in civil unions can receive accident and health coverage on a tax-favored basis, or whether the participant will need to include the fair market value of coverage provided to his or her partner in income (and whether the employer will need to pay its portion of employment taxes on that additional income). For Federal law purposes, the terms “married” or “spouse” are limited to marriages between one man and one woman. This means that, while same-sex marriages (i.e., Massachusetts ), civil unions (i.e., Vermont ) and domestic partnerships (e.g., California and New Jersey ) might be recognized for state law purposes, they are not recognized for Federal tax purposes, among others. But while individuals in these relationships may not be “spouses” for Code purposes, they may be “dependents” and thereby qualify for favorable tax treatment as such.

Particularly in the last few years, human resource professionals and practitioners have been subject to an ever-accelerating pace of change as new laws and regulations require benefits plans and programs to be constantly amended and modified to ensure ongoing compliance. In the grand scheme of things, the Act's changes to the definition of “dependent” are not all that significant—particularly when compared to, say, complying with the HIPAA privacy rules or updated tax-qualified retirement for “GUST.” But the Act's changes carry with them some important tax and personnel issues that demand attention.

* Alden J. Bianchi is a Member in the Boston office of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., where he leads the employee benefits and executive compensation practice.

Mr. Bianchi has written and lectured extensively on employee benefits issues. He is the author of three books, Employee Benefits for the Contingent Workforce and Plan Disqualification and ERISA Litigation (both published by Tax Management, Inc.), and Benefits Compliance (published by World-at-Work), and dozens of benefits-related articles. His speaking engagements include presentations to the American Bar Association, American Insurance Group, Deloitte & Touche, PricewaterhouseCoopers, Salomon Smith Barney, UBS, ING Financial Services and the Risk Insurance Management Society, as well as a host of bar groups and professional, educational and civic organizations.

Mr. Bianchi is a graduate of Worcester Polytechnic Institute and the Suffolk and Georgetown Law Schools, and he holds an LL.M. in taxation from the Boston University Law School. He is listed in Woodward & White’s The Best Lawyers in America, and Marquis’ Who’s Who in American Law, and he is a Fellow of the American College of Employee Benefits Counsel

In 1974 one year shy of marking 100 years of existence a new plant was dedicated. The Company continued to grow through the 1980s by acquisitions and the addition of a circular grinding department and expansion of the warehouse. Once again the Company's dedication to its Founders concept of manufacturing the best possible product from the highest quality ingredients and continuous improvement lead Hyde through the difficulties that the close of the century brought upon American Manufacturing. Hyde emerged into the 21st Century fulfilling its vision statement “To be the most respected supplier of hand tools and machine blades in the world” Hyde blades today are involved in the manufacture of everything from airplanes to zippers, from agricultural harvesting to steel centers used in the diamond wheels that cut the material used in space exploration.

Hyde has always been dedicated to its customers and employs cutting edge technology to continue to manufacture the finest quality product. This same level of dedication has been carried forward in its involvement and contributions to the community of Southbridge. Hyde has remained true to its mission statement, which says in part “In all these endeavors we strive for excellence and emphasize that our Customers and our Employees are our most important assets.”

The example set forth in the 19 th century by Isaac Perkins Hyde to stay the course and do what you know best as best as you can have made Hyde Manufacturing an American Success Story.

The EBS Foran Group is pleased to have been of service to the Hyde Group for more than twenty years! We look forward to many more years of partnering with this Dynamic Organization.

Here is another viable way to trim those escalating health care costs!

Did you know that in any particular group, about 6 out of 100 members will experience some type of hospitalization on an in-patient basis in any given plan year? So what does this mean?

Well, here is a relatively simple idea! Add an in-patient co-pay (or increase the current co-pay) to your health plan. If you modify the benefit schedule to include a $500 co-pay for instance, the savings over a plan with no such co-pay can be as much as -5% (depending on other risk characteristics).

For a group of 100 members, (estimated at 20 individuals and 30 family units) with estimated premium of approximately $400,000 the savings would be about $20,000 while the expected liability is $3000 (6 x $500 co-pays). If the normal utilization occurs, the plan could save as much as $17,000 in this example (higher utilization would result in reduced savings).

Now, the interesting part with this arrangement is that if a Health Reimbursement Arrangement (HRA) is established, you can fund the members out of pocket cost so your Employees are not necessarily harmed by this plan design change. And, under an HRA:

•  The benefit paid is not considered a bonus subject to tax.

•  The insurance premium does not reflect first dollar liability for this expense which reduces premium.

•  The Employer can include this cost as a regular business expense.

HRA's do require a formal plan document and 125 Plan Document Amendment, but the value in adding this feature can be a great way to reduce rising health care costs!

Please contact us if you are interested in learning more about HRAs as well as other contemporary benefit plan issues!

Deductible leveraging occurs when one piece of the claim cost is "frozen" while others are not. An example of this is the co-pay. For example; in year one an office visit co-pay (paid by the Employee) is $10. The Employee incurs an office visit that costs $80. The employee pays $10 and the Plan pays $70. In the second year there are no plan changes and the employee has another office visit. With 14% medical care trend that office visit in the second year will now cost $91.20 (1.14 X $80). The employee still pays $10, but now the plan pays $81.20. In this case, medical care inflation to the employee is zero (0 %) while medical care inflation to the plan is not 14% but 16% ($81.20 divided by $70).

This concept becomes more significant the larger the "frozen piece" of the puzzle is. For example some Employers may have deductibles included in their Plan or larger co-pays for such things as hospital inpatient co-pays. Again, employing a 14% trend factor let's assume for example that an Employer's plan has a $200 calendar year deductible that the Employee must satisfy prior to receiving benefits. After the deductible the Employee pays 20% of the expenses and the plan pays 80% of the expenses. During the Plan Year, the employee has outpatient surgery, which costs $1,750. The employee pays $200 and then pays $310 (20% of $1,550), for a total expenditure of $510. The plan pays $1,240 (80% of $1,550). In the second year the employee has the same procedure performed. Now the bill for this procedure one year later is $1,995 (1.14 times $1,750). The employee still pays the $200 since there were no plan changes and then pays 20% of the remaining $1,795 for a total expenditure of $559. The employee's trend is 9.6% ($559 divided by $510). The plan on the other hand pays $1,436 (80% of $1,795) resulting in a trend factor of 15.8%.

In self –funding where the Employer purchases Individual Stop-Loss protection deductible leveraging can truly produce significant concerns. For example in 2003, an Employer purchases a policy with a $100,000 individual deductible. This policy provides that if any of the Employers covered Employees has individual claims that exceed $100,000 during the contract period the amounts over that $100,000 will be reimbursed to the Plan. During 2003 an Employee has claims totaling $247,000 for an ongoing condition. The Employer during this plan year is reimbursed $147,000. In 2004 this employer renewed this policy with no changes to the deductible. Again, .In policy year 2004 this same employee has claims that total $281,580 (1.14 times $247,000). The employer is reimbursed $181,580. The employer's trend is 0% as his share of the cost of this claims remains at $100,000. The insurance carrier on the other hand has recognized a trend of 23.5%. And this situation usually ends up with the Employer Group receiving a rate increase by the reinsuror who now has a larger share of the risk load

As the International situation continues to be precarious, it is important that Employers be aware of the provisions of the “Uniformed Services Employment and Reemployment Rights Act of 1994” (USERRA) which require that COBRA-like continuation of health care benefits be extended to active Employees who leave employment to actively serve in the armed forces.

USERRA governs the employment rights of those who voluntarily or involuntarily take a leave of absence to participate in the Uniformed Service, including active or reserve duty, and the National Guard in training or “Full Time National Guard Duty.” The law applies to all Employers' Health Plans, voluntary or involuntary. Unlike COBRA no Employer private, public, small, church or federal is exempt from USERRA. Please note that USERRA is much more flexible than COBRA.

Dependents who are serving are not entitled to USERRA because they are not the primary subscriber of the health insurance. Only the Employee is entitled to USERRA, dependents do not have separate rights, as they do under COBRA. Former Employees, currently on COBRA, are not active Employees and therefore, do not have any rights under USERRA.

Unlike COBRA, which has notices that are formalized by regulation (1), USERRA does not have a specific notice that needs to be sent out. There are currently proposed regulations issued by The Veteran's Employment and Training Service (VETS) (2) that would allow Plan Administrators and fiduciaries to develop “reasonable” procedures for electing coverage. It is reasonable that some form of notice must be given to the employee once the employer is aware that the employee will be leaving for active duty. The nature of Military service dictates that any procedures and notice requirements to cover the possibility that the employee may not be able to respond in what would under other circumstances be considered a reasonable time.

When the Employee returns to work they can enroll back into the plan as an active employee, or can “ride out” the 18 months of USERRA Coverage while actively working.

Both the COBRA Rights and USERRA Rights should be explained in the Plan's Summary Plan Description(s). USERRA is made to be lenient due to what duties the Employee may be conducting, so use caution when dealing with a USERRA participant. The guidelines are vague, unlike the specific COBRA Rules. The best thing for an Employer to do is to offer COBRA and USERRA concomitantly, attach USERRA rights with your COBRA Notice when giving it to a Uniformed Service Member.

More (Specific) detail regarding USERRA can be found on the DOL's Website: http://www.dol.gov/elaws/userra.htm

1. Fe. Reg. Cite) Notices are effective 11/28/2004 & 01/01/2005

http://www.dol.gov/ebsa/regs/fedreg/final/2004011796.pdf

2. 69 Fed. Reg. 56265

These plans may be either fully Employee paid, fully Employer paid or paid by a combination of Employer and Employee funds. In plans that have Employer participation there is often the additional advantage that this participation may be used as a "leverage tool" to offset benefit changes in a medical plan. The Bureau of Labor's Statistics indicate that 68% of Employers with 20-90 and 90% of Employers with 100 or more Employees make dental coverage available. This is the first in a series of articles to describe how these plans function, their impact on the workplace and their effect on the overall cost of Employee Welfare Benefits.

Group Dental Insurance contracts have been patterned after group medical expense contracts and they contain many similar, if not identical, provisions. Dental plans may be limited to specific types of services, or they may be broad enough to cover virtually all dental services. In addition, coverage can be obtained from various types of providers, and benefits can be in the form of either services or cash payments. Many fully insured Dental Plans are moving toward a managed care approach to providing benefits .The most common example of this is the emphasis on providing a higher level of benefits for preventive care. As fully insured Dental Benefit plans have become more prevalent, the percentage of persons receiving preventive care has increased. As a result, the percentage of people requiring care for more serious dental problems has decreased.

The federal tax treatment of fully insured Dental Benefit premiums and benefits is the same as the tax treatments for medical expense premiums and benefits. In Self Funded Dental Benefit plans an Employer may self administer the plan or retain the services of a Third Party Administrator. In either case, the Plan may use a preferred provider network to provide the dental services.

Many fully funded dental plans as well, as self-funded plans, can be classified as indemnity plans or managed care plans and as with medical care expense insurance, different plan types may be available, Latest statistics indicate that 31% of fully funded plan participants are covered by under traditional fee-for-service indemnity plans; 37% are covered are enrolled in dental PPOs and 13% in DHMOs. An additional 19% are estimated to be participants in non-insured discount dental plans. Rarely is there any type of conversion privilege for fully insured Dental benefits. However, Dental coverage is subject to the continuation rules of COBRA.

There is an immediate and long-term impact that the introduction of these dental plans can have on the workplace even though they may be of no direct cost to the Employer. This will be the topic of our next article.

EBS recently participated as an Exhibitor in the 2nd Annual BIZ-WIZ Conference & Marketplace presented by the Cape Cod Chamber of Commerce at the Four Points Sheraton Hyannis on January 27th 2005. Despite January's stormy weather the event was well attended and many EBS Foran "stress balls" were distributed to the attendees.

Ken Lombardi has recently presented a course on Market Trends and Flexible Spending Accounts for Lorman Education Services. The Massachusetts Division of Insurance approved this program for Continuing Education Credit. Additionally, Ken was a presenter at a recent Practice Maintenance Seminar sponsored by the Massachusetts Society of Anesthesiologists, Inc.. His topic was High Deductible Health Plans and Medical Savings Accounts.




EBS Foran Featured Employee

Our featured Employee in this edition of the EBS Forum Newsletter is Meagan E. Foran.

Meagan joined the EBS Foran Group on a full-time basis in September 2003.  Previously, Meagan was employed by the Dennis-Yarmouth Regional School District following her graduation from Assumption College in 2002.

Meg's primary responsibility at the present time for the EBS Foran Group is to work with other Team members in the administration of our COBRA unit where she has been named Director of COBRA Services.  Meg has embraced the challenges of administering the COBRA services for our Clients with a significant level of dedication and enthusiasm and she has been well received by all Clients and COBRA beneficiaries during her day-to-day interaction with people involved in this important area of Benefits Administration.

As a licensed Health Insurance Broker, Meagan also works on small case renewals for EBS Foran Clients obtaining online renewal information from various carriers and then sharing the same with our underwriting department.  In addition to her COBRA responsibilities, Meagan also assists in administrative services as required in the office and she has also worked on special assignments and projects.

During her college years, EBS Foran also employed Meagan on a part-time basis where she providing assistance in the office on various tasks and helping with the pre-renewal process for our small group cases.

A native of Worcester , Massachusetts , Meagan presently resides in South Dennis, Massachusetts and she has been regularly attending various educational forums on timely Employee benefit topics.

While in College, Meagan maintained a vigorous academic schedule with a Major in English and a Minor in Political Science.  Meagan was also able to excel in athletics where during her senior year, she was named a Collegiate All American in Women's Lacross e  as well as the Northeast Ten Goalkeeper of the Year (wom e n's lacross e ) and a Northeast   Ten All - Star along with being the   MVP of the Assumption College Wom e n's Lacross e Team for the second consecutive year.  Given Meg's skills, both in the classroom and on the athletic field, it comes as no surprise that she is recognized here at EBS Foran as a strong team leader and someone that possess exceptional communication and organizational skills.

Shortly, Meagan will also be visiting with Clients to provide assistance on Customer Service issues as we further expand our scope of services in that regard.

During her free time, Meagan enjoys working on renovations for her newly purchased home and playing with her puppy “Busta”, a dog that she adopted from the streets of Puerto Rico. She also has returned to her High School Alma-Mater, Cape Cod Academy, to coach the Girl's Lacrosse Team.   

When asked what the favorite part of her job was, Meagan jokingly said “the end of the day”…. but then seriously added, “I enjoy the most working with people and helping them solve problems because that's what our Organization is all about!”  Meagan follows in the family tradition of joining the EBS Foran Group which was established by her father and also includes her brother, Patrick, as a member of our professional team.

Congratulations Meg on being our featured Employee and we wish you continued success with the EBS Foran Group for many years to come!

These changes often consist of increases to office visit and emergency room co-pays. Historically such co-pays have been in the $5 (office visit) and $25 (emergency room) range, but modest increases such as $15/50 or even higher, can produce important and immediate savings in the form of premium reductions.

Other benefit changes that are typically considered are co-pays, (or less frequently coinsurance), for ambulatory or in-patient surgical procedures. These co-pays typically range from $100 to $500. Again, the introduction of such co-pays can produce significant reductions in premium increases.

Since these premium reductions affect both the Municipality and the Employee, (consistent with the respective premium contributory shares), they can offer important cost-containment that represents true "win-wins".

Often, if the employee contributory premium share is in the “average” range of 20-30 percent, the Employee's premium savings will be greater than the out-of pocket cost increase due to the co-pay change(s). If the out-of-pocket costs to the employee are further buffered with the use of a Flexible Spending Account, the savings/cost ratio can be very favorable to the Employee.

In the consideration of such options, Municipal Employers are reminded however, that changes to Employee group health plans are a mandatory subject of bargaining. Any prospective change to benefit plans should be discussed with labor counsel or other responsible Municipal officials. Existing labor contract language should be reviewed to determine the full extent of “management rights” to consider and introduce such changes.

Finally, and particularly for those communities that are associated with Joint Purchase Groups, the impact of the Dennis decision must be considered and appropriate notice to labor unions provided.

Despite all of these implications, many Communities are successfully introducing benefit modifications as described above and doing so in a cooperative partnership with their Employees and labor representatives. We would be pleased to assist you in this process. Please give our office a call to learn more.

Every community should consider this strategy as part of their effort to contemporize their group health plans, and achieve the cost-containment gains that such strategies provide.

In December of 2004 Blue Cross Blue Shield of Massachusetts announced that a small number of emergency medicine physicians have decided not to become part of their HMO and PPO networks. While Blue Cross Blue Shield will still process these claims and there will be no impact on the cost of these services, members may be required to complete a claim form in order to have the claim be processed. These forms are available online at www.bluecrossma.com or can be obtained by calling the Member Service number on the front of the ID card. The following is a list of emergency facilities that as of December 2004 have physicians that have chosen not to participate in the Blue Cross Blue Shield HMO and PPO networks:

•  Anna Jaques Hospital
•  Cape Cod Hospital
•  Caritas Carney Hospital, caritas Holy Family Hospital, Caritas Good Samaritan Medical Center, Caritas Norwood Hospital, Caritas St. Elizabeth ‘s Medical Center.
•  Jordan Hospital
•  Metro West Medical Center
•  Morton Hospital and Medical Center

Blue Cross Blue Shield of Massachusetts HMO Not-For-Profit Status:

As of January 01, 2005 Blue Cross Blue Shield HMO plans will be issued under a new Not-For-Profit subsidiary. This was done to make the Blue Cross Blue Shield HMO comparable to other HMOs, which are formed under such Not-For-Profit entities and therefore not liable to federal income taxes. This FIT was loaded into the rates for the HMO plan Blue Cross Blue Shield offered under its structure as a public trust in Massachusetts. While the savings will be minimal from .2% to 1% the carrier maintains this will establish parity in the Market place.

COBRA Update

COBRA ELECTION FORMS:

To avoid sending separate COBRA Notices to all of the family members that are qualified beneficiaries be sure to include all such family members by name and relationship to the Employee in the Election Forms to sent to COBRA eligible employees. As always, we recommend your notice be sent by both regular and certified mail.

Women's Health and Cancer Rights Act (WHCRA) Annual Notice Requirement:

The WHCRA requires that in addition to the notice that must be presented to all new enrollees an annual notice must also be sent to all participants. This is an exception to the notice requirements commonly associated with Summary Plan Description rules. The Group Health plan, its insurance companies or HMOs may send these notices. You should check with your insurance provider to be sure that this requirement is being met. For a sample notice form you may contact us at ebsforan.com.

The Employee Retirement Income Security Act of 1974 (ERISA) is a Federal Law governing the design and administration of Employee Benefit Plans. ERISA defines the term “employee benefit plan” to include any pension benefit plan or any welfare benefit plan. A welfare benefit plan is any plan that provides, through the purchase of insurance or otherwise: medical insurance; benefits in the event of sickness, accident, disability, death or unemployment; severance pay; vacation benefits; training programs; day care centers; scholarship funds; prepaid legal services; or any welfare benefit described in the Taft Hartley Act. For the purpose of this article, we are limiting our overview to welfare benefit plans and have excluded any reference to ERISA pension requirements. For those clients with pension plans, we encourage you to review your ERISA compliance with your attorney.

Perhaps the most important exception outlined in the ERISA regulations is that relating to Government and many church plans. Under ERISA section 4(b), Governmental and some church plans are not subject to any of the requirements of Title I of ERISA, including its reporting and disclosure provisions. As a result, Government Entities and many church plans are not subject to ERISA.

While the exempt entities may not be subject to ERISA, most opt to provide some level of information to plan participants regarding their rights under the Plans which the exempt entities maintains. Because ERISA does not apply, it does not mean that there are not other state laws under which participants could claim that communications from the exempt entity have been less than forthcoming. As a result, many exempt entities opt to follow the ERISA Summary Plan Descriptions requirements in whole or in part.

The goal of ERISA is to protect the interests of participants and their beneficiaries in employee benefit plans. ERISA requires that sponsors of employee benefit plans provide participants and their beneficiaries with adequate information regarding their plans. The law also contains provisions for reporting to the government and disclosure to plan participants.

To be in compliance with ERISA, the Plan Administrator must provide plan participants with Summary Plan Descriptions (SPD) and in addition, make other documents available upon written request (within defined timeframes) and have copies available for examination. These documents include the latest updated SPD, latest form 5500, trust agreement or other plan document that serves as the plans constitution. While ERISA requires that plans be established pursuant to and administered in accordance with written plan documents keep in mind that an ERISA governed plan may exist even if there is no written plan document. An example would be when an Employer has a practice of giving severance pay to Employees that are laid off or terminated but does not have a formal plan. We encourage you to seek the advice of your legal counsel should you have any questions in this regard.

Under ERISA Summary Plan Descriptions are required to be distributed to each plan participant and to each beneficiary receiving benefits as follows: For existing plans, a new participant must receive a copy of the SPD within 90 days after becoming a participant and a beneficiary must receive a copy within 90 days after receiving benefits. For newly created plans, an SPD must be distributed to participants and beneficiaries within 120 days after the plan is first instituted. Failure to meet these standards can result in substantial fines being levied against the plan sponsor. Further, when a plan is significantly modified, plan participants must be provided with a revised SPD that reflects the changes to the plan. It is also important that plan sponsors take a reasonable measure to ensure that plan participants actually receive the SPD. Distribution by first class mail is considered to be acceptable while merely posting it in a common area is not.

An excellent reference tool to use is the ERISA Reporting and Disclosure Chart for Welfare Benefit Plans prepared by Attorney Robin S. Lazarow of the Law firm Mirick O'Connell. Which Follows this article.

The U.S. Department of Labor has a very good Web site that clearly explains the requirements for ERISA compliance. ( www.dol.gov/ebsa ) We encourage you to review this web site and to familiarize yourself with the ERISA requirements for all of your benefit plans. Should you require legal counsel with a specialty in this area we would be glad to give you a referral.

View Basic Reporting and Disclosure Requirements for ERISA Welfare Benefit Plans

Employers today understand the value of a high quality benefits package, both to attract and retain the best Employees. Over time, however, the cost of offering these benefits has increased. As a result, Employers are looking for more affordable ways to deliver high quality Employee benefits. The most commonly offered add-on or Voluntary Benefit is permanent life insurance. The second most common is disability insurance which we will cover in a future newsletter.

What is Voluntary Permanent Life Insurance?

It is a non-qualified, Employee-paid whole life insurance program that allows Employees to purchase individually-owned policies on themselves and their eligible dependents for a “whole” lifetime of insurance protection. This whole life insurance product is priced to be competitive when compared to similar products that an Employee might purchase privately. In addition, employees make premium payments through the convenience of payroll deduction. Some of the program features are:

• Affordable permanent life insurance for Employees
• Premiums are paid through payroll deduction
• No Employer contributions-employees pay all premiums
• Simplified underwriting
• Permanent coverage on spouse and eligible dependent children
• Portable coverage- Individual policies can be continued at job change or retirement at the same level premium
• Income tax-deferred cash values
• Easy implementation

Benefits for Employers

This type of program complements existing benefits and can be either stand alone or combined with existing group term life insurance. It will help to enhance your total Employee benefit package without dramatically increasing your overall benefit cost. Some of the additional benefits to Employers are:

• There are no Employer contributions… premiums are paid through payroll deduction

• Helps to avoid expensive term conversion charges

• Minimal administration responsibilities

• No tax-associated recordkeeping

• May be offered to a special classification of Employees such as managers or supervisors
or any other classification of employees

•Added prestige to Employer because the program is a valuable benefit which an Employer can make available which can significantly boost employee morale

Benefits to Employees

The peace of mind that an Employee has knowing that there insurance needs can so conveniently be taken care of only makes for a more satisfied Employee. Add to this the following benefits and Employee-Employer goodwill can be greatly enhanced:

• Immediate coverage… as soon as the application is signed employees and their dependents are immediately given insurance protection under a temporary insurance agreement

• Convenient premium payments through payroll deduction

• Portable coverage… policies are individually owned, and therefore, can be continued at job change or retirement at the same level premiums

• Post-retirement insurance… at retirement, the policy's cash value my be used to provide a reduced amount of paid-up insurance coverage with no further premium payment. Or, the policy's cash value may be used to supplement retirement income or for any other purpose

• Simplified underwriting… medical exams and other requirements normally associated with the purchase of life insurance are oftentimes entirely eliminated

In conclusion, if you are looking for some good news to tell your Employees consider adding voluntary programs to your benefits package. It's the perfect way to stretch your benefit dollars and provide a real service to your Employees.

We can help design the best package for you and your Employees