How? Well, roughly 75 percent of employee lawsuits happen because of accidental disconnects between an business’s internal policies and procedures, and what’s written in the plan documents.

Here are two areas where some the costliest errors lurk, and three steps your fim can take to catch and correct the mistakes before you’re ever sued.

1. Policy/coverage discrepancies

Many firms’ written benefits policies and plan documents are like siblings who start to drift apart as they grow up.

In the benefits realm, nevertheless, the plan sponsor has the “parental” power – and legal responsibility – to be certain written policies and plan documents remain close as they grow and change.

As a routine practice, firms should be sure changes in their benefits policies are also written into the formal plan documents, as reported by benefits attorney William Wright.

If push comes to shove in court, any inconsistency with plan documents can prove fatal for the company. Example – Upper-level management passes a new rule that staff members must work 30 hours a week to be eligible for the health plan.

Benefits and HR then write the new coverage policy into employees’ benefits  handbooks and hold meetings with staff to explain the change.

Now suppose an worker drops to part-time status. Are you legally protected when the worker challenges the loss of benefits?

Not necessarily. for the policy in  the handbook to stand up in court, the plan documents must also say there’s a 30-hour-a-week eligibility requirement.

Same thing goes for disputes over run-out coverage.  Suppose it’s your firm’s policy to carry over coverage for a cancelled staff member during the COBRA election period, but the requirement was never written into the plan document.

A few weeks later, the employee has a major health claim.  The TPA denies it, saying coverage had expired. Reason –  the plan document says “active employees” are covered, but does not specify that the insurer pay claims until the end of the month.

The likely result –  the ex-employee sues, saying the organization is liable for the mistake.

2. Coordination of benefits

Watch out for cases where an employee’s claim could  be covered under two or more policies (e.g., your firm’s plan and one from a spouse’s employer).

Be certain there’s a clear-cut coordination-of-benefits policy in all of your plan documents. Ordinarily, if a plan contains no instructions for coordination of benefits, it’s expected to pay first. Two key areas to check –

1. Be certain there’s a statement that says only the amount actually paid by each plan are going to be charged against the maximum benefit, and

2. Make certain that the order of benefits determination spells out which plan compensates first for a covered child if the employee is divorced from his or her spouse.

In like fashion, when your firm offers domestic partner coverage, make sure there’s a coordination-of-benefits statement for dependent and non-dependent partners.

Three best practices

On an ongoing basis, you can cut your lawsuit risk by 75% when you –

• gather all materials related to specific plans into a binder, including renewal letters from vendors and materials distributed to employees

• perform a yearly self-audit, checking to see if plan-document wording matches your current policies, and

• pay special attention to keeping benefits descriptions up to date.

Reminder – When you don’t have a formal plan document, your contract with the provider legally serves as the “control document” for the plan. By law, all employees must’ve access to the plan document and be notified in writing of any alterations, including minor ones.

Nonetheless, the same study found that only 21% of those companys believed their workers had a strong understanding of the workings of their own benefits.  and 5% believed that their workers didn’t know anything about their benefit choices.

Implication –  the greater emphasis placed on staff member education, the more likely staff understand the role of benefits in sum compensation.

Like most organizations, insurance carriers rarely keep perfectly up-to-date records on their patrons.  As a result, plan sponsors often get charged for individuals  who shouldn’t be covered on the health plan. Here are two areas to watch –

Claims versus enrollment

It’s common to have cancelled workers still in the carrier’s claims eligibility system – even after they’ve been taken off your enrollment list.

Reason – Many carriers use separate computer systems for tracking enrollment and claims – and the two systems use different technologies that don’t “talk” to each another.

Carriers have no incentive to upgrade their systems, according to CSG president Eric Raymond, because doing so would cost the insurers money.

Leaving things as is, carriers simply charge patrons when they put through claims for ineligible workers and dependents.

That’s why an annual claims audit is a must –  That way, you won’t get charged fees for claims the carrier accidentally put through.

Even if your firm outsources the work (it’s a rather time-consuming task when performed in-house), you’ll generally see several percentage points of savings on your total healthcare costs.

Dependent eligibility

Poor carrier record-keeping also can be the cause for employees’ ineligible dependents not being taken off the enrollment files.

Few carriers have systems that automatically integrate with your Payroll department and your current enrollment forms (including the electronic “employee self-service” kind). Instead, data entry people  employed by the carriers input the information in the vendors’ system.

Human error by the carriers’ workforce costs plan sponsors another several percentage points. Solution –  annual dependent audits.

In times like these, it’s vital for peers to share their concerns, experiences suggestions. A few weeks ago, HRBenefitsAlert.com ran a special report on calming employees’ 401(k) fears.

The reader comments revealed that many benefits pros were just as afraid as workers, and people ’s frustration led to some unfortunate carping back and forth between several readers.

The purpose of the comments section, apart from giving people  the opportunity to react to the story, is to provide a forum for benefits managers to interact.

It’s my hope that we can generate an exchange ideas that have (and have not) been working at readers’ companies during the current situation. Specifically –

• What are you doing to manage health benefits costs as budgets are either frozen or shrink?

• Have you noticed a dip in morale or productivity with all the doom-and-gloom in the news?

• How’s your corporation attempting to calm employees’ fears about salary freezes or layoffs, 401(k) losses, health cost shifting and other issues that get a lot of mainstream media focus?

• What are you saying to workforce to deliver the news they need to know but also keep morale high?

Thank you in advance for your willingness to share your specialistise and personal experiences. Everybody benefits in the long run.

Nearly 80 percent of businesss provide workforce access to flu shots, either onsite or at a local clinic.  And 72 percent cover some or all the cost (typically compensating between $10 to $20). But –

• At 89% of firms, fewer than half of workforce actually get a flu shot

• At 38 percent of organizations, fewer than 25 percent of employees participate

• only 6% of firms are able to get at least 75% participation

• 87% of survey respondents said  they never measure absenteeism during flu season, and

• 75% never tracked whether employees who get flu shots are actually absent less often.

The firms that get best results are those that actively educate workers, track flu-related absenteeism and send sick workers home.

Over the last five years, there’s been a announced 69% jump in worker employee assistance program use related to personal financial concerns.  The trend is not all that surprising.

Statistics show that, for the first time since the Great Depression, the typical American has negative savings – in other words, debt exceeds income – in a typical month.

With salaries frozen in many organizations and many staff racking up higher and higher credit card debt, the problem may continue to get worse.

Troubling trends

Here are some ominous numbers from a recent employee survey –

• 27 percent of respondents said they were “one major setback away from financial disaster”

• 22% say they were “worse off than last year, with less take-home income and more debt”

• 40 percent say their employer is “insensitive to their employees’ financial needs,” and

• only 6% said they felt comfortable with their current financial situation and ability to manage their debts.

The majority of personal-finance related EAP use arises from concerns over debt management, household refinancing and/or failed investments.

A recent survey found the average worker has three unused vacation days at the end of the year. But 33 percent admit that they sometimes take “unofficial” vacation days of a half-day or more.

Not surprisingly, the day after Thanksgiving, Christmas Eve day and December 26 rank one of the highest “presentee” days among businesses (in particular in the white-collar realm) that remain open on those days.

In terms of the expanded question of presenteeism, what’s keeping people  from using their vacation time as it’s intended?  Top answers –

• supervisors frown on staff taking vacation time

• There’s too much work to make up after using vacation time, and

• individuals  want to “reserve” time in case of an emergency.

On the flip side, many folks who take vacation time have trouble leaving work behind. One worker in four admits to checking work e-mail and/or voicemail while on vacation.

And 29 percent say they have trouble forgetting about work-related stress, even when they’re using paid time off.

Among all industrialized nations, U.S. personnel receive the fewest yearly vacation days – 14 on average.

Seventy-one% of staff members lack basic knowledge of standard benefit programs, according to a new study by the American Payroll Association (APA).

Low participation rates

The ASA research study  focused on workers knowledge of their company’s pre-tax benefits. While almost three quarters of workers say they live paycheck to paycheck, and would like to stretch their current salaries –

• 52% don’t take part in available flex spending accounts (and 6% of had never even heard of an FSA)

• 17% didn’t know their corporation offered a health savings account or health reimbursement arrangement (46% of those alert to the benefit still don’t participate), and

• 18 percent are unaware of existing transportation benefits or subsidies their company offers.

That’s all changed, with the rules established earlier this year by the DOL and USA  Treasury Department.  The rules themselves haven’t changed, but they’ve been clarified. Here’s what you need to know –

‘Participation incentives’ are fine

As long as you structure incentives as rewards for wellness participation, the new rules provide a lot of freedom. All of these are fine under HIPAA –

• reimbursing all or a portion of the cost of gym membership

• financial rewards for undergoing health risk appraisals so long as the reward is based on participation rather than test results

• stimulating preventive care by waiving co-pays or deductibles for these services (i.e., well-baby visits or prenatal care)

• reimbursing workers for the cost of smoking-cessation programs without regard to the result, and

• offering rewards tied to employees attending a monthly health education seminar or working with a wellness Coach.

Conditional rewards OK if…

But what if you want to make the reward conditional on participants meeting specific health goals? Example – Employees who achieve a cholesterol count under 200 get a 20 percent reduction in the cost of their medical plan contributions pending results of an annual cholesterol test.

The feds say it’s OK under health insurance portability and accountability act (HIPAA) to do this, too, but your plan must meet five additional requirements –

• The reward can’t exceed 20% of the cost of employee-only (or, when you allow dependents to participate, employee-plus-dependent) coverage under your health plan.

• The standards should be reasonable (e.g., you can’t limit rewards to folks who can run a marathon).  The rewards also can’t be used as a backhanded way to adversely single out certain personnel (e.g., rewards for all non-diabetics).

• Participants must’ve the opportunity to qualify for the reward at least once each year (e.g., a smoker who fails to quit this year gets another chance next year).

• Rewards should be available to all “similarly situated individuals.” In other words, you can’t make a company-compensated weight management program available to certain staff members but not others.

When, for medical reasons, it’s unreasonably difficult for an individual to satisfy conditions that are otherwise reasonable, you must offer an alternative. Example –  A pregnant employee might not be able to meet certain standards, so you must offer her an alternative.

Negative incentives violate health insurance portability and accountability act (HIPAA)

So what’s not permitted under HIPAA’s non-discrimination rules? Anything that punishes people  for their health conditions or health risks.

The rules prohibit employers from charging different premiums, contributions, co-pays or deductibles based on personal health factors like obesity or use of tobacco. Nevertheless, it’s OK to reimburse these expenditures based on someone’s participation in your health promotion program, without regard to success.

In addition, the feds have added an important new non-discrimination rule – Employers’ health care plans can’t deny benefits for treatment of injuries resulting from a health condition, even when the condition wasn’t diagnosed before the injury.

For  instance, some healthcare plans have a “suicide exclusion” that denies payment for treating self-inflicted wounds from a suicide attempt. Now let’s suppose the employee suffers from clinical depression. Even if the depression was undiagnosed before the suicide attempt, it’s illegal for your plan to deny benefits to this employee.

Best practice – Create a records retention policy as your first step. A host of federal and state laws specify how long you must retain pay- and benefits-related documents.

Compliance is essential if a current or former worker sues or the DOL, IRS or the state audits your records.

Here’s a records-retention schedule recommended by employment lawyer Jacqueline McManus –

• Retain for two years worker personnel files, including performance reviews and training.

• Hold these for three years –  wage records, including time cards, base pay and overtime wage-rate calculations and records explaining wage diferentials for personnel performing the same job, and hold I-9 forms for three years from hire date or one year after termination, whichever is later.

• Keep these four years –  all Payroll documents, including – home address records, and all wage records, including weekly OT earnings, straight time pay, deductions, bonuses, pay period designations and payment dates.

• Use a five-year retention window for staff member health info like medical and first-aid records from on-the-job injuries, and drug and alcohol testing records.

• Keep this benefits data for six years (or one year after plan termination) –  elections and enrollment forms, benefit change documents, and COBRA notices.

• Retain 401(k) files indefinitely.