As an employer, you spend a significant amount on health care benefits. You want employees to have health and welfare options that meet the needs of their families – and understand their options so they pick the right plan.

Covid-19 Impact on Employee Benefits Administration

Covid-19 Employee Benefits Administration

We recognize that your organization is undertaking some difficult decisions regarding your workforce and benefits.  Curcio Webb has been evaluating how COVID-19 could potentially impact your employee benefits and administration.  We are sharing some thoughts around the impact to health and welfare and retirement plan administration. We are available to discuss the implications to your organization as not all items apply to every plan sponsor. We recommend discussing any changes with your ERISA counsel prior to implementation.

Health and Welfare

  • Dependent Care Flexible Spending Accounts 

    Many organizations allow employees to contribute to a Dependent Care Flexible Spending Account.  Many employees will not need these dollars as child care facilities are closed, employees are working from home and can provide this care, or family members have lost income and the employee is not able to make contributions.  While the reality of the current situation may not be classified as a “life event”, some employers are interpreting the current situation as such.  Employers may consider allowing employees to stop contributions and provide permission to administration providers to accept dependent care contribution changes.  

  • Employee Layoffs & Furloughs 

    We expect many of our clients will need to lay off or furlough employees.  This will increase the number of participants on COBRA.  Many health and welfare administration contracts are structured where the provider 1) charges per COBRA enrollment kit, or 2) charges a higher fee for COBRA participants over active participants.  Employers may look for relief from these added fees as this could be a substantial unexpected cost.  Also, if an employer is planning to subsidize COBRA coverage for laid-off or furloughed employees, we suggest reaching out to your administration provider as soon as possible.  Some arrangements may take time to set up and you’ll need to confirm how you will identify affected employees.

  • Unpaid Leave

    Some organizations are considering placing employees on unpaid leave instead of laying them off in order to continue providing active benefits (with some employer subsidy rather than making employees pay 102% of premiums for COBRA).  This may trigger direct billing of premiums to these participants which typically adds cost under the H&W administration contract.  Employers may want to consider placing these employees in deduction arrears – and allow employees to make-up the employee cost at a later time.

  • Working from Home

    Administration providers are already feeling the pressure of their employees working from home.  This will likely have a trickle down impact on annual enrollment planning and potentially providers’ ability to staff additional annual enrollment customer service.  Also, your ability to manage annual enrollment activities is likely compromised due to other priorities.  We recommend conversations with your provider on realistic annual enrollment schedules and expectations.  In addition, consider making few changes for 2021.

  • Temporary Salary Reductions

    Some of our clients are considering temporary salary reductions for specific populations.  If your organization considers this, be sure to identify exactly how salary data will go from your organization to your administration provider, and how life insurance and disability coverage (and other salary-based benefits) should be calculated during the temporary reduction period.

Retirement

  • The impact of laying off, furloughing employees, or placing them on unpaid leave has a potential significant impact to 401(k) plans.  If employees are no longer “active”, they may not have access to loans. Plan sponsors may need to review their loan eligibility requirements. 

  • The “coronavirus-related distribution” is a new distribution type that is available to active and inactive employees.  We suspect many recordkeepers will not be able to set up the new distribution type very quickly, and will leverage hardship withdrawal functionality.  Since hardships are considered an “in-service withdrawal”, the standard recordkeeper functionality may limit access to populations.  Plan sponsors should confirm accurate setup of this distribution with their provider.

  • Many organizations have loan initiation fees (typically $50-$100).   Some organizations are also charge a hardship approval or hardship/distribution processing fees (often $25-$50). Given that many employees may require cash, employers may want to consider waiving loan and distribution fees.  The added loan and distribution volume will ultimately add revenue to the 401(k) providers.  We expect providers will partner with clients that want to institute this change (as providers should not be profiting from the added volumes).

  • The new regulations stipulate a suspension of loan payments for one year for qualified individuals.  Some recordkeeper arrangements require participants to pay loan maintenance fees.  Organizations should confirm that their provider is waiving these fees in light of no loan repayment processing and extension of the loan terms.

  • Many plans do not have a partial distribution option in their 401(k) plan.  Terminated employees that have left their money would be forced to take the one-time “coronavirus-related distribution” or a total distribution to get access to money.  Plan sponsors may want to consider amending their plan to allow for partial distributions.

  • The “coronavirus-related distribution” appears to have minimal documentation requirements (i.e. employee self-certification) as opposed to standard hardship withdrawals where employees provide proof of need. Cyberthieves may see this as an opportunity to fraudulently access employee accounts for money.  We recommend conversations with your 401(k) providers around data security:  How will withdrawal verifications be performed?  Will wait periods on changes to banking information be enforced or waived?  For employees who have forgotten their PINs/passwords, what security will be performed to ensure employee identity (as we suspect you will not make employees wait for a new PIN in the mail)?

  • Similar to the point above on population salary reductions, many plans provide a fixed retirement contribution based on pay.  Plan sponsors should be considering the potential impact to these contributions (data to the provider, are contribution reductions intended, etc.).


As a side note, many administration providers offshore portions of benefits administration to India.  In light of India requiring work-at-home arrangements, data security of anything processed in India needs consideration as the standard data oversight in offices is no longer applicable.   We recommend employers have conversations with their providers on how they will ensure data protection in their offshored locations. 

We hope you find these thoughts useful.  As we continue to have conversations with clients on their issues and think of other benefit implications, we will be sharing.  We recognize that many of these items require conversations with your providers.  Please reach out if you would like assistance with any of these discussions. 

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The Next Generation of Health and Welfare Benefits Delivery

health welfare benefits delivery

Outsourced health and welfare benefits administration is often viewed simply as a vehicle for capturing benefit elections, managing customer service issues and supporting daily administration processing activity. Healthcare strategy is primarily focused on the design of holistic solutions to contain health care spending while delivering high quality care and improving health outcomes.

Healthcare strategy is critical; however, these strategies increasingly need to consider the capabilities of a benefits administration service provider to bring to life the overall value for employers and employees alike.  The next generation delivery model is a well-designed administration platform that will engage a multi-generation workforce while maintaining consistency with company culture, vision and values.

More Responsibility, More Confusion

In today’s complex health care environment employees are challenged to take a more active role in managing their care while taking on greater financial risk.  Smart decision making, both at enrollment and at time of care, is critical given the prevalence of High Deductible Health Plans (HDHPs).  Additionally, as the cost of healthcare continues to grow, cost containment strategies are critical for all parties involved.

In addition to sophisticated enrollment decision-making tools, an array of innovative healthcare cost management point solutions promises to improve care delivery while reducing cost.  Examples include health navigation aiding complex decision making, cost transparency, second opinion and tele-health, as well as wellness and condition management support.

Employers make significant investments in these tools; however, they are not always easily accessible, understood, or utilized.  Given their depth and breadth, it is critically important to present them in an intuitive way so employees can access the care they need when they need it.

Next Generation Benefits Administration Delivery Capabilities

Leading H&W benefits administration providers make the investments necessary to transform their delivery models to support clients with these challenges.  The marketplace has seen an influx of improved technology and new thinking.  As a result, H&W administration capabilities have advanced more in the last few years than in the previous decade, positioning a company’s chosen provider to materially impact an organization’s healthcare spend.

Download the full guide using the link below.

 

5 Reasons to Start Looking for a New Health & Welfare Consultant

Your relationship with a Health & Welfare consultant is an important partnership that must be cultivated over time. However, there are signs that indicate when it’s time to start looking for a new consultant partner:

  1. Seeing High Turnover in Your Consulting Team. As consulting firms experience turnover, this could trickle down to your team. Some turnover is good as it provides you with new team members who can share new ideas or help refine current processes, but cycling through consultants on a consistent basis is a red flag.
  2. Experiencing a Service Level that has Gone Steadily Downhill. At the start of any new consulting relationship, it is not uncommon to have a very engaged and proactive consulting team. That same level of service may diminish as the relationship matures over time.
  3. You are Experiencing Organizational Changes. As your Benefits/HR team or organization (through a merger, acquisition or divestiture) undergoes change, your current Health & Welfare Consultant team may not be the right fit for the new team or organizational structure.
  4. Your Needs have Evolved. Your organization or benefits administration strategy may have grown in complexity (e.g., new populations, new focus on wellness, etc.) and your consulting needs may have outgrown your current consultant relationship.
  5. It is Time to See What Else is Out There. It may be time to hear from other benefit experts with different perspectives to determine if your current consultant is the right partner for the long-term.

As an independent and objective benefits advisor, we can help you conduct a search for a Health & Welfare benefits consultant that will be a great fit for your needs. We typically begin each project by benchmarking your current fees and services. If warranted, we can then help you conduct a full marketplace evaluation.

Curcio Webb utilizes a flexible and proven evaluation process, honed through 20 years of experience and ensures our clients have a market competitive consulting agreement at the end of the process. Let us help you achieve your goals.

Ask us how to get started with a benchmarking project!

Written by: Gayle Michaels, Curcio Webb

benefits administration advisor

You’ve Selected an Active Health Insurance Exchange Service Provider—Now What?

Active health insurance exchanges are growing in popularity.

Although adoption rates for active health insurance exchanges (HIX) have not yet reached the levels predicted when these delivery models first hit the market, steady growth continues as employers evaluate health & welfare benefit administration delivery strategies. The Kaiser Family Foundation and the Health Research & Educational Trust 2016 Employer Health Benefits Survey showed that twenty-eight percent of employers with 5,000 or more employees are considering HIX models to more effectively deliver benefits and manage costs.

The HIX marketplace is evolving

The HIX marketplace continues to evolve with enhanced delivery models, new service providers and expanded offerings. Evaluating the merits of adopting a HIX strategy and selecting the service provider best positioned to deliver on this strategy can be challenging. Desired outcomes will be diminished without a meticulous focus on building a solid foundation through one of the most critical phases of the process—implementation and effective change management.

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