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John
John, Employment Lawyer
Category: Employment Law
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Experience:  Exclusively practice labor and employment law.
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Would a discount dental plan - not insurance ,PPO discounts

Customer Question

Would a discount dental plan - not insurance ,PPO discounts from a fee schedual
have to be erisa compliant?
Submitted: 1 year ago.
Category: Employment Law
Expert:  Infolawyer replied 1 year ago.

Hello

Expert:  Infolawyer replied 1 year ago.

It depends who is offering it. If privately purchased, it would not. If offered through the employer, then it would. Kindly let me know if that is fast and clear. Thank you

Expert:  Infolawyer replied 1 year ago.

awaiting your reply, thanks.

Customer: replied 1 year ago.
fast but not clear. Erisa compliant means self funded groups under the DOL. I think it must be in the plan document rap? (Clarify) Do DHMO sponsored by employers to employees volentary or employeer paid fall under erisa regs? SOURCE AND LOCATION OF ANSWER IN FED GUIDE LINES. THANKS
Expert:  Infolawyer replied 1 year ago.

The plan itself would make reference to erisa and that would be the source to look to.

Customer: replied 1 year ago.
I own the plan and brokers are asking if we are ERISA compliant or need to be. I need reference to Fed guide lines to give them solid specific answers now that a lot of groups are using self funded benefits. We have no mention of erisa in our materials. Discount plans have less regulation because we do not pay claims. Answers need to pertain to employer sponsored volentary or employeer paid list bills over 2. If it takes longer to find specific location and or case law that is what I need. Thanks Kevin
Expert:  John replied 1 year ago.

Hi, new expert here. Some questions about your plan. How is it these are being offered to the employer groups - namely 1) what is paid for the plan and by whom - in other words is the employer paying some kind of premium for this?, 2) are these voluntary programs offered by the employer - in other words does the employer just have a flyer or something and they tell employees that the employer will allow them to join these with a wage withholding?, 3) is the employer "endorsing" the plan (i.e., adopting it as part of the package of benefits they offer) or is merely allowing the insurer to advertise on premises, 4) what if anything will the employer receive in connection with the plan?

Customer: replied 1 year ago.
We sell to businesses. Some employeers will pay for the employees plan then payroll deduct for family. We also offer vision, chiropratic, doctors by phone roadside and legal discount products. These products usually get deducted. We have had employeers pay the whole amount although. occasionally we will enroll individually at work site because the employeer does not want to do deduction. Not often and always less productive. The employeer receives nothing. We do not have a monthly billing fee like competition. We are about to sign contract with large general agency that will be using us has a choice against a capititation dental product. Ingrained in the quote is a association self funded element for the first 6300.00 deductible payable at 50 percent thru tpa then fully insured bronze plan thru Blue Cross or Human a or Kaiser. The will all be volentary or employeer paid.
Expert:  John replied 1 year ago.

I see. So the ultimate answer here is it depends on how the employer uses your plan, but in most instance it is an ERISA plan . First the DOL regulations (29 CFR 2510.3-1(j) state as follows:

(j) Certain group or group-type insurance programs. For purposes of title I of the Act (ERISA) and this chapter, the terms “employee welfare benefit plan” and “welfare plan” shall not include a group or group-type insurance program offered by an insurer to employees or members of an employee organization, under which

(1) No contributions are made by an employer or employee organization; (you sometimes have this but mostly not)

(2) Participation the program is completely voluntary for employees or members; (you say they will be voluntary or employer funded - so you have no idea)

(3) The sole functions of the employer or employee organization with respect to the program are, without endorsing the program, to permit the insurer to publicize the program to employees or members, to collect premiums through payroll deductions or dues checkoffs and to remit them to the insurer; (not the case) and

(4) The employer or employee organization receives no consideration in the form of cash or otherwise in connection with the program, other than reasonable compensation, excluding any profit, for administrative services actually rendered in connection with payroll deductions or dues checkoffs. (correct)

So your program is is an ERISA plan for all intents and purposes. There appears to be small number of instances where you solely go to the employer and individually sign them up, but that's the exception. So your plan would need to be ERISA compliant. Namely Reporting and Disclosure (you have no claims paying function because you are a discount program). Whether you assign this to a third party administrator, agree to be the administrator yourself or have the plan sponsors become the administrator that is your choice. Most discount plans I'm aware of are tied in with other medical plans that have their own administrator. The discount plan then has only a disclosure document, which is usually a pamphlet. In other words there is minimal to no reporting and disclosure in any event. See 29 CFR 2520

Expert:  John replied 1 year ago.

Wanted to check back in with you - has this answered your question? Is there anything else I can do to help you?

Customer: replied 1 year ago.
Thanks for the quick and accurate response. Some more questions for you:
under 4) we currently do not give compensation to the employer for payroll deduction.
Under J) "certain group or group type insurance programs" (would our discount plan be considered group type insurance?)Also, what specifically would the disclosure pamphlet contain? Would the flyer or pamphlet be sent to each group or filled in house?To clarify we are not associated with an insurance agency, we are straight dhmo although I am licensed health and life agent in Colorado.Is filling a 5500 necessary? And how would we go about doing this to be Erisa compliant.
Expert:  John replied 1 year ago.

It would be characterized as a pre-funded self insurance of a sort, because the premium they pay to you is just a one time (not paid as a general payroll practice as it would need to be to not be considered self insurance)payment it is not part of a payroll practice. While it may not seem like insurance to you because there isn't a pay per service payment from insurer to provider, it is an exchange in any event.

The pamphlet would be the plan document you have top provide, and it provides information on when an employee can begin to participate in the plan, how service and benefits are calculated, when benefits becomes vested, when and in what form benefits are paid, and how to file a claim for benefits. If a plan is changed, participants must be informed, either through a revised summary plan description, or in a separate document, called a summary of material modifications, which also must be given to participants free of charge. To the extent that you want to become the administrator you personally would have to ensure all employees in the plan get a copy and any amendments.

To be compliant with ERISA you need to have a written plan (which I cannot imagine would much more complex that the pamphlet you provide). Again because you're not going to be paying claims so to speak you have little to do on the claims handling side of thing (I suppose there could be someone who claims to have a discount card but you don't have a record of them). The last part is the government reporting with the 5500. Now, you don't have to become the administrator, and therefore not responsible for this - the employer or a tpa could be, but this is what you'd have to do if you were.

Expert:  John replied 1 year ago.

Hello again, If you have nothing further on this matter, I'd appreciate a positive rating for the question, otherwise I get no credit for my answer.

Customer: replied 1 year ago.
What exactly defines employer endorsement?
Expert:  John replied 1 year ago.

Essentially it is whether the employer promotes it to employees as something they should or must have versus just having it as an extra that they have in a pamphlet or something in their office. As you can see it's very hard for an employer not to take on an ERISA function as to the plans it has...even if it actively does nothing regarding the plan.