Plan Document Signed Months after Effective Date

[BetterCallSaul]

A health plan under ERISA is supposed to go into effect 01/01/18.  

The Plan Document isn't finalized or signed by the Plan until 07/15/18, yet it claims to be "retroactively" effective back to 01/01/18.

In the meantime, claims have been paid and denied based on a Plan Document that was never signed or distributed to Claimants until after it was signed.

Is this on the up and up or not?

[Luke Bailey]

If there is a basis for taking the position that the plan was adopted by the company effective 1/1/2018 (e.g., was approved by board of directors), you should be fine. Moreover, the DOL doesn't care (they just want to make sure employees get there benefits) and the IRS does not seem to be as punctilious with regard to welfare documents as they are with retirement plan documents. Even then, a retirement plan can generally be adopted as late as the last day of plan year and be retroactively effective as of first day of year, except that the IRS's position is that the plan must be adopted before you have elective deferrals (again, I would argue that adoption of an unsigned plan document is adoption). If you have employee pre-tax contributions for this health plan through a cafeteria plan, then you may have a greater audit exposure, so see if you can establish that there was other corporate or shareholder action (e.g., board minutes or action of the sole shareholder) showing legal adoption before the plan document was executed.

[leevena]

I agree with Luke, this is done all the time, maybe not as late as your situation though.  But as I read your post I was struck by your questioning the legitimacy of the retroactive piece of this.  Is there more to this situation?  I have been doing this since 1982, and cannot ever remember a SPD being signed and ready on the effective date.  While not as late as this situation, they were all technically retroactive.

BTW, I assume you were referring to a SPD when you said plan document.

[Chaz]

I'm not sure what you mean by "claims have been paid and denied." Who paid and who denied the claims and what sort of claims were they?

[Peter Gulia]

BetterCallSaul's originating post doesn't specify whether the health plan was insured or "self-funded".

 

[BetterCallSaul]

Sorry. Let me be a little more specific. 

Plan was fully funded up until 12/31/17.

On 01/01/18, Plan becomes self-funded. 

The self-funded Plan Document (the SPD and Plan Document are the same in this case) isn't  drafted until weeks or sometimes months after 01/01/18--and then not finalized (approved) by the Plan and formally signed/adopted until 07/15/18 and then distributed to Plan participants  sometimes afterwards with a retroactive effective date of 01/01/18.

However, the Third Party Administrator has been paying and denying medical claims (I. E. denied as not medically necessary, experimental, exclusions, UCR, etc. et al) based on the draft that wasn't signed until 07/15/18 and that Participants haven't even seen a copy of until after that.  

The question is, how can claims be (more so denied as no one cares when things are paid) denied based on a document that didn't exist until months after the supposed effective date and when Participants have never been given a copy of it? 

[leevena]

Thanks for the clarification.  A couple of comments for you.

1. The funding vehichle is not relevant, both insured and self-funded plans are subject to ERISA guidelines.  

2.  A Summary of Benefits and Coverage document must be provided to plan participants during enrollment, this document is more likely to be read than a SPD.

3.  Benefit information is provided to administrator for purposes of claim adjudication and payment.  As mentioned earlier, this is standard operating procedure.  I doubt if I have ever seen a SPD delivered before effective date.  

[BetterCallSaul]

1.  Understood. 

2.  While it's more likely to be read, ERISA does still mandate Participants are to be provided with a copy of the Plan Document. 

3.  Saying it's SOP is akin to saying everyone does weed--that doesn't mean it's legal.  ERISA mandates the Plan Document is to be given to a Participant either 60 or 120 days maximum after the effective date.  In this example, not only did that not happen it wasn't even signed until well after that (and there is no board resolution or anything of the sort on file). 

So a Participant goes to the DOL with this and audits the Plan, they're just going to shrug their shoulders and say it's SOP and who cares if the law was followed? 

I find that hard to believe.  Especially given recent articles about upticks in DOL audits. 

[LLCJD]

While there are timing requirements to issue SPDs, no penalties actually accrue unless and until the SPD is not provided within 30 days of a participant’s request for the SPD. Further, the penalty, if assessed, is assessed by a court.  Thus, the common lack of overt concern over the timing of distribution of the required documents exists based on the low risk associated with issuing SPDs to participants late and the reliance on summaries issued prior to an SPD actually being issued.   I imagine the DOL would cite a plan for failing to timely issue the SPD if it was aware, but beyond that, there is likely very little risk absent a lawsuit being filed against the plan. 

[leevena]

BetterCallSaul.

I understand your concern, but am puzzled by your tone.  Is there more to this story, you come across as very angry?

Also, while reading this again it occurred to me that a new SPD may not be required to be delivered in this situation.  If the required information of a SPD did not change there would not need to be a mandated delivery of the new SPD.  The mere fact that the funding changed from fully insured to self funded does not necessarily constitute a new plan.  Was there any significant reduction in benefits?

[Chaz]

I agree with the points that others make above.  There is virtually no reason that the plan cannot be administered in the ordinary course even in the absence of ERISA-compliant updated documentation.  That appears to be what is happening.  

[BetterCallSaul]

Sorry if my tone seems angry; it's not directed at any of you and I appreciate your input and insight.  There is more to the story and it just doesn't affect one plan, it potentially affects dozens. 

I can tell you that that I know for a fact the SPDs are being distributed late, that there are material reductions always being made (a new SPD is always generated from scratch for every plan so while some benefits/exclusions/definitions etc. may remain the same from the old one, most are changed) without participants being notified (the SBCs do not address these reductions, particularly UCR reductions and how they're calculated --Google Acosta v Macy's for more on that if you wish), and there's already been one lawsuit filed against a plan due to this issue because hundreds of thousands of dollars were denied on someone based on an exclusion he was never made aware of because an SPD was never given to him. 

My concern now is that the same type of lawsuit could be brought against all these plans and they're being put needlessly in a risky situation, some or most without even the knowledge or realization they're in that position. 

Because according to this and multiple other sources...these are exactly the type of things the DOL would look for in an audit.  

https://www.onedigital.com/blog/dol-health-and-welfare-plan-audits-the-sobering-truth/

So I'm just trying to gather as much information and insight into this before I decide what I'm going to do about it.  Because legally and ethically I feel like I have to do something if this is truly the case. 

[leevena]

You statement above tells us you are trying to gather as much information and insight into this before you decide what to do about it.  Please expand, what is your role in this.

Also, it appears to me that you are overreacting to all of this.  There are 4 or 5 respondents with over 100 combined years of experience all telling you to not worry.  

[BetterCallSaul]

I don't want to get into too many specifics for obvious reasons, but I'll share that I work for a Third Party Administrator.  Hence how I know dozens of plans are potentially affected. 

I'm also the one responsible for denying the aforementioned person's claims because of an exclusion that may not have been legally valid, which I was unaware of until the lawsuit was filed.

So I may be responsible for unintentionally ruining a man's life (and that of his family)financially when he's also trying to recover physically from something horrific. 

If it was all done above board with the i's dotted and t's crosses I'm more pragmatic about it.  It's part of the job.  If the Plan doesn't cover something, it doesn't cover something. 

But if it wasn't and beyond that even more lives are being affected negatively not only by files I handle but others I work with because of this...that's not something I can abide by.  

And while I appreciate all your thoughts and insights based on your experiences, what I can find in other sources (some of which I've provided) and even reading similar lawsuits seems to contradict at least the technical letter of the law that this isn't overreacting and just a minor thing.

I can also share I'm not the only employee here who shares these concerns so it's just not something rattling around solely in my head 

 

[leevena]

Multiple people here have told you that all of this is SOP, if you choose not to believe, so be it.  You may also want to get another job.

[BetterCallSaul]

Actually the conclusion I've come to is I'm being told it's "SOP" but no one can explain to me how it doesn't violate the letter of the law of ERISA.  

Which to me is akin to saying it's only illegal if you get caught because as someone else said well, the risk of a lawsuit or audit is low. That doesn't make it legal and when you do what I do, you assume every file has a chance of ending up in court. 

And now one has explicitly accusing the plan of these very violations.  If I'm that fat off base, apparently an ERISA attorney is as well. 

So I'm going to talk to an attorney and then the DOL if need be.  

But needless to say, I agree on the new job. 

Thanks for all your input.  I do appreciate it. 

[RatherBeGolfing]

Obviously you need to do what you feel is right.  But before you do that, take a step back and consider your sources / understanding of what is going on.  I would not want to make a career decision based on information I found in a blog, it is just not good practice.  As for what an ERISA attorney thinks, understand that just because something is alleged, that does not make it a fact.  What "side" is this ERISA attorney on?  Is s/he truly neutral? is s/he counsel for the plaintiff? Counsel for the defendant?  

You also looked at some "similar lawsuits".  Do you have the training and experience to pick apart case law?  The vast majority of practitioners in our field do not. 

I'm not telling you to not "blow the whistle".  Im just saying you need to make sure you are right and that you understand the consequences of doing so. 

[leevena]

Let me ask you one final question.  How is it that a relatively inexperienced TPA employee has discovered this and no one else since 1974 has, including the Erisa attorney you have spoken to?

You need to give up on this.