Documentation and Deadlines

Documentation

While you may certainly ease the requirements employees must submit, you should keep in mind the documentation recommended by HMS is commonly accessible for 90% of most populations and serves to validate the language in your SPD (Summary Plan Description) in regard to eligible dependents. While there will be a certain number of employees who may not be able to provide certain documents due to their unique circumstances, the majority of your employees should have no issues in obtaining the documentation.

Spouse

We have found it important to require both the marriage certificate and an additional form of documentation. The second form will better establish the current state of the relationship through reasonable measures and show the employee and spouse remain legally married. If the marriage certificate requirement is removed, you will not be able to flush out any common law marriage or domestic partnership situations. If the additional form of current documentation requirement is removed, you will not be able to ensure that the employee and covered spouse remain legally married.

Child/Disabled Dependent

The relationship of a child to the employee is best validated through a legal document such as a birth certificate listing parent names or a court order identifying the relaionshp of the child to the employee.  Income tax returns should only be used to establish dependency of a disabled dependent child over the limiting age of the plan. The use of an income tax return to establish the relationship of a child is not recommended for three specific reasons.


  • Health Care Reform (PPACA) legislation does not allow a plan to use such items as residency or dependency to be used to determine eligibility of a child for benefit coverage. Internal Revenue Service (IRS) guidelines establish a dependent in terms of residency and dependency upon the person claiming that dependent on their return.


  • Many people do not file their tax returns as the IRS code dictates but rather look for the most financiallybeneficial way to file for their situation. For example, come married couples with 2 or more children will choose to both file their tax returns as “head of household” claiming 1 or more children as the standard deduction taken for both parties tends to be more advantageous than the standard deduction for couples filing “married filing jointly”. Dependent verification auditors are not IRS auditors.


  • Unique family situations often dictate who will claim a child as a dependent for income tax purposes. For example, divorced couples often alternate claiming a child while parents who were never married may verbally agree on income tax arrangements and have no court documentation to provide. These arrangements do not impact the relationship of a child to the parent but can make it difficult to provide this form of documentation for an audit.


    • Deadlines

    Establishing deadlines for the Amnesty and Verification phases will be critical to completing the audit in a timely manner. While you can allow a little flexibility in offering employees to respond within a few days of the deadline, you will want to be cognizant of late submissions and its effect on the overall process.

    Late submissions delay your ability to finalize results of the audit. Allowing late submissions to be accepted for prolonged periods of time also undermines your authority in the minds of your employees. If employees feel you are not being truthful about the deadline, they may also feel you are not being truthful about consequences to be imposed.

    That being said, you may find, allowing late submissions after the Verification Phase deadline is prudent, especially if your response rate at that point is not very good. Allowing a little more time through the use of the Final Notice of Adverse Action letter allows you to remind employees of your intent to remove any unverified dependents from coverage while allowing them “one last chance” to provide the required documentation. This allows you to address the issue of non-compliance while reaffirming your intent for the audit process, as communicated in multiple communications by this point.

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