Employee Benefits Consultants: directory of firms

The Department of Labor describes fiduciaries as those who exercise discretionary control or authority over plan management or plan assets, or who have discretionary authority or responsibility for plan administration, naming plan trustees, plan administrators and members of a plan's investment committee as examples. Its guidance for employers adds that status depends on the functions performed rather than the title, that investment advisers are typically included, and that attorneys, accountants and actuaries generally are not fiduciaries when acting solely in their professional capacities.

The duties are specific: run the plan solely in the interest of participants and beneficiaries and for the exclusive purpose of providing benefits, act prudently, diversify plan investments to minimize the risk of large losses, follow the plan documents so far as they are consistent with the law, pay only reasonable plan expenses, and avoid transactions that benefit related parties.

The consequence for a fiduciary who breaches these duties is personal. The Department states that fiduciaries can be held responsible to restore any losses to the plan or to restore any profits made through improper use of plan assets, and that courts may order a breaching fiduciary removed. This is why the question of whether your adviser accepts fiduciary status, and in what capacity, belongs in writing in the service agreement.

Benefits advisers are paid in several ways: commission from the carrier built into the premium, a flat fee, a fee per employee per month, or a combination. None is wrong in itself, but the model shapes the advice, because an adviser paid by commission is paid more when premium rises and a flat-fee adviser is not.

For retirement plans this is regulated rather than optional. The Department of Labor's guidance states that hiring a service provider is itself a fiduciary function, that the law requires fees charged to a plan to be reasonable, and that service providers must disclose all compensation they expect to receive directly from the plan as well as compensation from other sources, so that fiduciaries can assess reasonableness and identify conflicts of interest.

Monitoring is also a fiduciary act rather than a courtesy. The guidance describes reviewing performance reports, checking the actual fees charged, reviewing changes in compensation and following up on participant complaints. An employer who selected a provider a decade ago and has never revisited it has not finished the job.

The cycle starts months before renewal, with claims experience or utilization data where available, a view on what the carrier is likely to propose, and a decision about whether to market the plan. Plan design choices, contribution strategy and any change of funding arrangement are settled next, because they determine what employees will see.

Open enrollment is the visible part, and it is a communication project. Employees make a decision once a year with imperfect information, and the quality of the explanation determines whether the money spent on the plan is money employees value.

Then the reporting. The Form 5500 series is the annual return and report of employee benefit plans, developed jointly by the Department of Labor, the IRS and the Pension Benefit Guaranty Corporation, filed electronically, and serving both as a compliance and research tool and as a disclosure document for plan participants and beneficiaries. Who prepares it, who signs it and who holds the records should be settled explicitly, because an unfiled or late return is a problem that keeps growing.

Continuation coverage under COBRA gives workers and their families who lose health benefits the right to choose to continue group health benefits for limited periods after qualifying events such as job loss, reduced hours or certain life changes. The Department of Labor states that it applies to group health plans sponsored by employers with twenty or more employees in the prior year, that qualified individuals may be required to pay the entire premium for coverage up to 102 percent of the cost to the plan, and that the employer and plan must give required notice to employees and families about their continuation options.

The employer shared responsibility provisions apply at a different threshold. The IRS describes an applicable large employer as one with at least fifty full-time employees, including full-time equivalents, on average during the prior year, with a full-time employee working at least thirty hours of service per week or 130 hours in a calendar month, and full-time equivalents calculated by combining part-time hours capped at 120 per employee per month and dividing by 120. An applicable large employer must offer affordable coverage providing minimum value to full-time employees or face potential payments, and must report offers of coverage to the IRS and to employees.

Two details catch growing companies out. The determination is made annually on the prior year's average, so you can become an applicable large employer based on a year that has already ended. And related companies may be aggregated for the count, which means a group of small entities under common ownership can cross the threshold that none of them crosses alone.

A group health plan is a covered entity under the HIPAA rules. The federal definitions list covered entities as health plans, health care clearinghouses and health care providers who transmit health information electronically in connection with a covered transaction, and protected health information is individually identifiable health information transmitted or maintained in any form or medium.

There is a boundary that matters enormously in a small HR department. The definition of protected health information expressly excludes individually identifiable health information in employment records held by a covered entity in its role as employer. So the same organization can hold information in two capacities, and the protections attach to the plan's records rather than to everything the employer knows about an employee's health.

In practice that means separating who can see plan and claims information from who makes employment decisions, keeping medical information in files separate from personnel files, and making sure an adviser handling enrollment data has the appropriate agreement in place. A benefits consultant should be able to explain exactly who touches employee health information in the process they are proposing.

A broker places coverage and is usually paid by the carrier. A fee-based consultant is paid by you and may accept a defined fiduciary role on the retirement side. A professional employer organization co-employs your workforce and brings its own benefits program, which can widen access for a small employer but ties benefits to the PEO relationship.

A benefits administrator runs enrollment and eligibility as a service, and a recordkeeper maintains retirement plan accounts and participant statements. Neither is necessarily giving advice, and neither necessarily accepts fiduciary responsibility. The useful exercise is to write down every party touching your plans and note, next to each, what they are paid, by whom, and whether they have acknowledged fiduciary status in writing.