Do you think you’ve complied with the Affordable Care Act mandates? Before you answer yes, you’d best take a close look at your Employee Handbook – a minefield for mistakes.
Employers often pay close attention to summary plan descriptions and other relevant plan documents, but those are not the only documents that should contain accurate information related to the Affordable Care Act. Some common employer handbook policies may be inconsistent with the requirements under the ACA.
For example, employee handbooks often state that employees are not eligible for health insurance coverage until after they have completed their 90-day waiting period. The ACA prohibits waiting periods exceeding 90 days, so where coverage would begin on the 91st day (rather than the first day of the month following a 90-day waiting period), this would not be a problem for ACA purposes. However that language may be inconsistent with the actual insurance policy/ plan documents which commonly state that coverage will start at the beginning of the month following a 30- or 60-day waiting period. The reason that many policy/plan documents reference a waiting period that is shorter than the maximum 90-day waiting period permissible under the ACA is that it is administratively difficult to put people on the plan on the 91st day (particularly when this 91st day might fall on a holiday, weekend, or simply in the middle of the week). Therefore, stating that coverage will begin on the first day of the month following a shorter waiting period (30 or 60 days) may be easier to track and administer, since employees don’t always start employment on the first day of the month. However, employers can provide for a 90-day waiting period in their plan documents as long as coverage actually begins on the 91st day.
If the employee handbook simply provides that coverage will not begin until after the employee has completed three months of employment, such a statement will be inconsistent with the requirements under the ACA, and will likely be inconsistent with a properly drafted plan document.
Another frequent inconsistency is defining “full-time” employee in the employee handbook as something other than what is provided in the underlying benefit plan documents. For health insurance coverage purposes under the ACA, “full-time” employees are employees working on average 30 or more hours per week, regardless of their classification. Employers must also keep in mind that there are approved methods of measuring the “30-hour” threshold.
Employers have the opportunity to use an employee handbook to document compliance with the requirements under the ACA. While an employee handbook does not need to provide the complete details of benefit eligibility and coverage, it should be carefully drafted so as not to provide inconsistent information with the underlying plans, and it should properly cross-reference the controlling plan documents and summary plan descriptions for all essential information.
Having outdated employee handbooks that do not reflect the relevant plan documents may create confusion for employees and open the employer up to unnecessary questions if the benefit plans are subject to an audit by the Department of Labor or the Internal Revenue Service. Employers should have their existing employee handbooks regularly reviewed and updated to ensure that all policies and procedures are in compliance with current federal and state laws.