Benefits May 7, 2003

Providers Are HIPAA Privacy Compliant

May 7, 2003 (PLANSPONSOR.com) - Compliance for the recently enacted privacy rule of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) is much greater at health care providers than other entities.
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A greater proportion of providers surveyed (78%) said they were compliant with the rule, compared to payers (68%) and clearinghouses (47%). April’s data represents a significant improvement over January where only 9% of providers, 5% of payers, and 14% of clearinghouses reported that they were compliant in the earlier study, according to Phoenix Health Systems and HIMSS Spring 2003 US Healthcare Industry Quarterly HIPAA Compliance Survey.

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Provider level of compliance is high in most areas of the privacy requirements. Tops among these is the near totality of providers (98%) who reported being privacy-compliant after posting and distributing Notices of Privacy Practices. Other high marks were noted in:

  • obtaining acknowledgement of receipt of Notice of Privacy Practices (97%)
  • obtaining patient authorizations for use and disclosure of Protected Health Information (PHI) (97%)
  • enabling mandated patients’ rights (96%)
  • documenting privacy policies and practices (91%)
  • maintaining accounting of disclosures (89%)
  • using “minimum necessary” restrictions (88%)
  • implementing security protections (82%)
  • monitoring organizational compliance (71%)
  • obtaining all required Business Associate agreements (60%).

TCS Too?

The strong progress of privacy compliance since January suggests that on-time implementation of the highly visible privacy regulations may have dominated the focus of healthcare HIPAA compliance efforts in recent months, the survey said. The emphasis on implementation of privacy regulations along with the technical complexities inherent in nationwide adoption of HIPAA standardized transactions may have delayed Transactions and Code Sets (TCS) compliance efforts in many health care enterprises, especially provider organizations.

These regulations stipulated covered entities that asked for a one-year extension for compliance with the TCS regulations were to begin testing their systems by April 16. However, the study found only one-half of participants reporting completion of TCS implementation activities and just 53% began internal testing by the HHS-stipulated April 16 testing deadline.

On a more positive note, the majority of organizations had completed TCS HIPAA awareness/education (78%), assessment (73%), and implementation project planning (67%). Further, almost 40% of respondents had already begun external testing with business partners.

Also, 80% of clearinghouses, 62% of payers, 55% of vendors and 49% of providers stated they were conducting internal transactions testing as of the TCS April 16 testing deadline. Some 53% of clearinghouses, 39% of providers, 39% of vendors and 37% of payers were conducting external testing with their trading partners, as of the testing deadline.

A total of 697 health care industry representatives responded to e-mail appeals of members of the two organizations. Providers comprised 70% of respondents, payers equaled 19%, vendors 9%, and clearinghouses 2%.The survey is available at http://www.hipaadvisory.com/action/surveynew/Spring2003.htm .

Compliance May 6, 2003

Final Comparability Regs Published

June 29, 2001 (PLANSPONSOR.com) - The Internal Revenue Service (IRS) has issued final regulations (TD 8954) that allow defined contribution and combined defined contribution/defined benefit retirement plans to satisfy nondiscrimination requirements based on plan benefits, rather than contributions.
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The final regulations kept the elements of proposed regulations on cross-testing, or so-called new comparability, plans issued on October 5, 2000.

These programs are designed to provide higher profit-sharing rates to highly paid employees. New comparability plans are cross-tested on a projected-benefits basis to meet nondiscrimination rules.

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Current rules allow employer contributions to be tested on either a present-value basis or cross-tested on a future-value basis that involves projecting benefits that would be payable at retirement. Cross-testing lets a defined contribution plan be tested like a defined benefit plan, essentially focusing not on the current rate of contribution, but on what a particular contribution for a given employee is projected to be – with interest – as an annual benefit paid when the employee reaches age 65.

The primary addition in the final regulations is a limit on the minimum allocation rate that combined plans are required to provide to nonhighly compensated employees under one cross-testing requirement.

Combined Plans Cap

According to BNA, the proposed regulations allowed combined plans to satisfy cross-testing requirements if they are:

  • primarily defined benefit in character
  • consist of broadly available separate plans, or
  • pass a minimum allocation gateway

That gateway occurs when:

  • each nonhighly compensated employee in the plan has an allocation rate that is at least one-third of the allocation rate of the highly compensated employee with the highest allocation rate (if the highest rate is less than 15%, percent)
  • the allocation rate for all nonhighly compensated employees is least 5% (if the highly compensated employee rate is between 15% – 25%) or
  • the allocation for each nonhighly compensated employee is least 5% plus 1 percentage point for each 5 percentage point increment (or portion thereof) by which the highly compensated employees rate exceeds 25%

The final regulations said the allocation rate that combined plans are required to provide for non-highly compensated employees need not exceed 7 1/2% of pay. The imposition of such a limit was recommended as necessary in order to avoid leading to the abandonment of defined contribution plans by employers.

Proposed Rules Expanded

The proposed regulations allowed defined contribution plans to satisfy cross-testing requirements if the plans provided broadly available allocation rates, age-based allocations, or an allocation rate for nonhighly compensated employees that is at least 5 percent of compensation or one-third the highest allocation rate for highly compensated employees–referred to as the minimum allocation gateway.

The proposed regulations also said a defined contribution plan that makes each allocation rate available to a group of employees that satisfies tax code Section 410(b), without regard to the average benefit percentage test, would be treated as having broadly available allocation rates and could use nondiscrimination testing.

The final regulations retain these requirements, and additionally permit two allocation rates to be aggregated such that nonhighly compensated employees with a higher allocation rate can be used to support a lower allocation rate.

The final regulations also allow uniform target benefit plans that do not comply with the safe harbor testing method under Treasury Regulations Section 1.401(a)(4)-8(b)(3) to satisfy the age-based allocations requirement.

In addition, the final regulations broaden the age-based allocations requirement to accommodate plans that achieve a smoother progression into higher rates based on the sum of age and years of service.

The Final Regulations

For MORE on comparability plans, see our PLAN DESIGN Solutions topic .

See Also The New Comparability Formula . 

And New Take on Comparability

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