Dependent Eligibility Verification Audit
On Feb. 25, 2019, notification of the Dependent Eligibility Verification Audit was sent to benefits-eligible employees. This second communication is intended to answer common questions you may have, including the need for the audit, and to provide you with additional information on the kinds of documents that can be used to verify eligibility for dependents.
Frequently Asked Questions
Following the initial notice, the vice president for finance and administration and the director of human resources met with leaders from Faculty Senate and Staff Council. Both groups had been receiving feedback from employees and desired to share concerns with the administration. In the meeting, faculty and staff leaders shared important points and made suggestions for improving the process. Based on that feedback, we have modified the audit process to expand the range of acceptable verification documents (in many cases, a simple tax return will now suffice). We have also revised the audit process to address data privacy concerns by providing alternate means of submitting verification documents. You may now upload documents through a secure web portal, send documents through the U.S. mail (documents would be returned to you at the conclusion of the process), or present your documents in person at the HR Building (no digital or paper copies of any kind would be made or retained in this case). This in-person visual inspection would be similar to the process of submitting employment eligibility documentation for an I-9 form. Dates and times for in-person verification will be included in the information packet that will be mailed to individual employees.
Section 125 of the Internal Revenue Code allows most employees to pay for health coverage with pre-tax dollars. It also outlines the rules that employers must follow to allow employees to receive these tax benefits. The IRS expects that employers will act to design and maintain plans that comply with federal requirements. Recent guidance on Section 125 plans stressed the importance of following the rules and noted the IRS can disqualify plans that do not meet basic requirements, such as operating a plan without a plan document or providing coverage for ineligible individuals. The IRS routinely audits plans for compliance with its rules.
We meet regularly with health care consultants, actuaries, and a campus advisory committee (including faculty, staff and retirees) to develop business processes that will protect the tax-favored status of our health plan. During the last year, our consultants recommended a medical claims audit (now complete), a prescription claims audit (now complete), and a dependent eligibility audit (now underway). These are standard and necessary tools used by plan sponsors to ensure compliance with federal rules.
The implications of noncompliance are significant. As noted, if U of I cannot demonstrate efforts to comply with tax rules, the IRS could disqualify the entire health plan. If that happened, all covered employees would be retroactively taxed on all deductions that were made with pre-tax dollars during the year. This is a disaster scenario from which we must protect the university and its employees.
Although U of I has many different benefit programs, the scope of this audit is limited to verification of the dependents covered on the medical/prescription, dental and vision plans.
The timing was chosen as the most convenient time of year for employees to avoid annual enrollment and those on summer status/vacation who could miss the deadlines due to vacations, etc.
First and foremost, we want you to know that the dependent eligibility rules are not changing. Specifically, the university plan provides coverage for legally recognized spouses and other eligible adults, regardless of gender. Nothing about this audit is designed to diminish or eliminate coverage for same-sex couples.
The university plan also provides coverage for children under age 26 and children of other eligible adults. An overview of the eligibility rules can be found on the benefits webpage.
A detailed description of eligibility rules can also be found in the Summary Plan Document on the same webpage.
To qualify as an eligible dependent, a person must be one of the following:
- Your spouse under a legally recognized marriage
- Common-law spouse
- Other eligible adult (OEA)
- A child under the age of 26
- Biological child
- Legally adopted child or a child placed with you for adoption
- Child of an OEA
- Child for whom you are the legal guardian
- Child who is required to be covered by a Qualified Medical Child Support Order
Although the audit may reduce health care costs for the university, the focus is on savings to covered employees. Ineligible dependents increase the cost of health care, and that cost is directly reflected in higher contribution rates for all employees. Dependent eligibility audits typically find 3-7 percent of dependents are not eligible for coverage. The estimated annual cost of ineligible dependents is $628,000. Especially in a year when the Legislature is reducing health insurance funding by over $1.2 million, it is even more important to manage health care costs for all participants.
Documents should be submitted directly to the University of Idaho Benefits Center at Morneau Shepell, U of I’s benefits eligibility contractor, via secure upload portal or via U.S. mail. For individuals who are not comfortable uploading documents or sending documents through the mail, the university will provide an in-person verification process. Dates and times will be included in the information packet mailed to individual employees.
Faculty and staff will have approximately one month to provide the required documentation. If you encounter problems or challenges, please call the University of Idaho Benefits Center at 800-646-6174 to explain the circumstances. An authorized representative will provide you with assistance in completing the verification. If the eligibility of your dependents is not confirmed by May 3, 2019, dependent coverage will only continue until July 1, 2019.
Our benefits eligibility contractor, Morneau Shepell, maintains the highest information security and data protection credentials in the industry.
Life changes sometimes affect a dependent’s status — people may divorce or separate, children reach the maximum age for coverage under a parent’s plan, etc. For these and other reasons, it’s occasionally necessary to confirm that dependents are still eligible to participate in our medical, dental and vision plans. Not only does this effort support the ongoing viability of our benefit plans, but it also helps us meet the requirements of Section 125 of the Internal Revenue Code. The IRS sets the rules employers must follow to allow employees to pay for health coverage with pre-tax dollars. A dependent verification review is a critical step in demonstrating compliance with the rules established by the IRS.
Documentation is based on the dependent to be verified. In many cases, a simple tax return will suffice. In other cases, affidavits, birth certificates, adoption papers or marriage certificates may be required. More information will be included in the information packet mailed to individual employees.
If you encounter problems or challenges obtaining the required documents, please contact the University of Idaho Benefits Center at 800-646-6174 for assistance in identifying other documents that may be used for verification.
Once your documents have been received and processed, our benefits eligibility contractor, Morneau Shepell, will send you a determination notice indicating the status of dependent eligibility. If all required documentation has been submitted, you will receive a confirmation of eligibility. If you have submitted partial documentation, you will receive a notice identifying the additional information needed to complete the verification.
The university appreciates your understanding and cooperation with this important compliance audit.