The scenario describes a situation where an employer is considering modifying their existing group health plan to better manage costs and improve employee satisfaction. The key considerations revolve around the trade-offs between different funding models, benefit designs, and compliance requirements. A level-funded plan combines aspects of both fully insured and self-funded plans. It offers a fixed monthly premium, similar to a fully insured plan, but also includes a component for claims funding and a stop-loss insurance policy to protect against unexpectedly high claims. If claims are lower than expected, the employer may receive a refund or credit. This approach can provide cost predictability while also offering the potential for savings. A fully insured plan transfers all risk to the insurance carrier, but it may be more expensive in the long run if the group has favorable claims experience. A self-funded plan gives the employer more control over plan design and costs, but it also exposes them to greater financial risk. An Administrative Services Only (ASO) arrangement is a type of self-funded plan where the employer contracts with a third-party administrator to handle claims processing and other administrative tasks, but the employer still bears the financial risk for claims. Therefore, level-funded is the best option in this case.

The scenario describes a situation where a company, “Zenith Dynamics,” is facing a decision regarding their group health insurance plan. The key is to understand the trade-offs between fully insured and self-funded plans, considering factors like risk tolerance, administrative capabilities, and cost predictability. Fully insured plans offer predictable costs and transfer the risk to the insurance carrier, while self-funded plans allow for greater control and potential cost savings but expose the company to higher risk and require more administrative expertise. Level-funded plans offer a middle ground, combining some aspects of both. Given Zenith Dynamics’ priorities—predictable costs, limited administrative resources, and aversion to significant financial risk—a fully insured plan would be the most suitable choice. This type of plan transfers the financial risk to the insurance carrier, provides a predictable monthly premium, and minimizes the administrative burden on Zenith Dynamics. The other options, while potentially cost-effective in some situations, would not align with the company’s stated risk tolerance and resource constraints.

To determine the appropriate stop-loss premium, we need to calculate the expected claims cost and then factor in the administrative fee. First, calculate the expected claims cost for each employee: High-Risk Employees: 20 employees * $15,000/employee = $300,000 Medium-Risk Employees: 50 employees * $5,000/employee = $250,000 Low-Risk Employees: 30 employees * $1,000/employee = $30,000 Total Expected Claims Cost: $300,000 + $250,000 + $30,000 = $580,000 Next, calculate the total number of employees: 20 + 50 + 30 = 100 employees Now, determine the per-employee expected claims cost: $580,000 / 100 employees = $5,800/employee Finally, add the administrative fee of 5% to the per-employee expected claims cost: Administrative Fee per Employee: $5,800 * 0.05 = $290 Stop-Loss Premium per Employee: $5,800 + $290 = $6,090 Therefore, the annual stop-loss premium per employee should be $6,090. This premium covers the expected claims cost plus the administrative fee, ensuring the employer is protected against high claims while the insurer covers the administrative overhead. The calculation considers the different risk levels among employees to provide an accurate premium estimation.

The scenario highlights a complex situation involving a self-funded health plan, ERISA regulations, and the potential for a breach of fiduciary duty. Under ERISA, plan fiduciaries have a duty to act prudently and in the best interests of plan participants. Failing to adequately investigate and address a known issue like the consistently higher claims from a specific clinic, especially when there are red flags such as billing irregularities and a lack of proper documentation, could be considered a breach of this duty. This is because the fiduciary is not taking reasonable steps to protect the plan’s assets and ensure that claims are legitimate. Ignoring such issues can lead to financial losses for the plan and its participants, potentially impacting the benefits available to them. Furthermore, ERISA requires fiduciaries to monitor third-party service providers, such as the TPA, and take corrective action if they are not performing their duties properly. In this case, the benefits manager’s inaction could expose the company to legal and financial liabilities. The company should have conducted a thorough audit of the clinic’s claims, sought legal counsel, and taken steps to recover any overpayments. Failing to do so represents a failure to uphold their fiduciary responsibilities under ERISA.

This question addresses the core principles of Health Savings Accounts (HSAs) and their interaction with other health coverage, particularly Medicare. An HSA is a tax-advantaged savings account that can be used to pay for qualified medical expenses. To be eligible for an HSA, an individual must be covered under a high-deductible health plan (HDHP) and cannot be covered by other health coverage that is not an HDHP. Medicare, even just Part A, generally disqualifies an individual from contributing to an HSA. This is because Medicare provides health coverage that is not a high-deductible health plan. However, an individual can still use the funds already accumulated in their HSA for qualified medical expenses after enrolling in Medicare.

To determine the required monthly contribution from the employee, we first need to calculate the total annual cost of the health insurance plan. This is done by summing the annual premiums for medical, dental, and vision coverage. The annual premium for medical is $9,600, for dental is $720, and for vision is $360. Therefore, the total annual premium is: \[9600 + 720 + 360 = 10680\] Next, we calculate the employer’s annual contribution, which is 75% of the total annual premium: \[0.75 \times 10680 = 8010\] Now, we subtract the employer’s annual contribution from the total annual premium to find the employee’s annual contribution: \[10680 – 8010 = 2670\] Finally, we divide the employee’s annual contribution by 12 to find the required monthly contribution: \[\frac{2670}{12} = 222.50\] Therefore, the employee’s required monthly contribution is $222.50. This calculation demonstrates how cost-sharing is determined in a group benefits plan, considering the premiums for different types of coverage and the contribution percentages from both the employer and the employee. The process involves summing the individual premiums, calculating the employer’s share based on their contribution percentage, subtracting this from the total to find the employee’s share, and then converting the annual employee share to a monthly contribution.

The scenario highlights a situation where a company’s wellness program inadvertently created a discriminatory impact. While the intention of promoting health and reducing healthcare costs is valid, the specific design of the program, by disproportionately burdening employees with pre-existing conditions through higher premium contributions, violates ERISA’s non-discrimination provisions. ERISA mandates that group health plans cannot discriminate in favor of highly compensated employees or against employees based on health factors. The key here is that the program, despite its good intentions, resulted in a disparate impact on a protected group. This is a violation, even if unintentional. The legal principle at play is disparate impact, where a seemingly neutral policy has a discriminatory effect. The company needs to revise the wellness program to ensure it complies with ERISA’s non-discrimination rules, potentially by modifying the incentive structure or providing alternative pathways for employees with pre-existing conditions to earn the same benefits. This could involve offering tailored wellness plans or adjusting the premium contribution structure to mitigate the financial burden on those with pre-existing conditions. The company must prioritize legal compliance and ethical considerations to avoid potential penalties and maintain a fair and equitable benefits program for all employees.

This scenario tests the understanding of Health Savings Accounts (HSAs) and their eligibility requirements. A crucial aspect of HSA eligibility is that the individual must be covered under a High Deductible Health Plan (HDHP) and cannot be covered by other non-HDHP health insurance. Being enrolled in Medicare, including Medicare Part A, disqualifies an individual from contributing to an HSA. This is because Medicare is considered “other health coverage” that is not a HDHP. Although Evelyn is still working and covered under her employer’s HDHP, her enrollment in Medicare Part A makes her ineligible to contribute to an HSA. She can still use the funds already in her HSA for qualified medical expenses, but she cannot make new contributions. The employer should inform Evelyn that she is no longer eligible to contribute to the HSA due to her Medicare enrollment.

To determine the employee’s contribution for the year, we must first calculate the total annual premium for the employee’s health insurance plan. The employer contributes 75% of the premium, so the employee is responsible for the remaining 25%. The total annual premium can be found by multiplying the monthly premium by 12. In this case, the monthly premium is $800. Thus, the total annual premium is \( \$800 \times 12 = \$9600 \). Next, we calculate the employer’s contribution, which is 75% of the total annual premium. This is calculated as \( 0.75 \times \$9600 = \$7200 \). Finally, to find the employee’s annual contribution, we subtract the employer’s contribution from the total annual premium: \( \$9600 – \$7200 = \$2400 \). Therefore, the employee’s total contribution for the year is $2400. This calculation demonstrates how cost-sharing mechanisms work within group health insurance plans, where both employers and employees contribute to the overall premium. The percentage split determines the financial responsibility of each party, impacting the affordability and attractiveness of the benefits package.

The scenario describes a situation where an employer is considering different group health plan funding arrangements. The key factors are the size of the company (250 employees), the desire for cost predictability, and the willingness to assume some level of risk. Fully insured plans offer the most cost predictability because the employer pays a fixed premium to the insurance carrier, who then assumes the risk of claims exceeding the premium. Self-funded plans offer the greatest potential for cost savings but also the greatest risk, as the employer is directly responsible for paying claims. Level-funded plans are a hybrid approach that combines some of the cost predictability of fully insured plans with some of the cost savings potential of self-funded plans. ASO (Administrative Services Only) arrangements are typically used with self-funded plans, where the employer contracts with a third party to administer claims but retains the risk. Given the employer’s desire for cost predictability and the size of the group, a level-funded plan represents the most suitable balance between risk and cost control. It offers more predictable monthly payments compared to a self-funded plan, while still providing some opportunity for savings if claims are lower than expected. It also allows the employer to potentially receive a refund if claims are significantly lower than the pre-determined funding level. Fully insured plans are generally more expensive for groups of this size, and self-funded plans carry too much risk for an employer prioritizing predictable costs. An ASO arrangement alone does not address the funding mechanism, it only concerns claims administration.

The Affordable Care Act (ACA) imposes various requirements on employers, including mandates related to dependent coverage. One key provision is that employers offering health insurance to their employees must extend coverage to adult children up to the age of 26, regardless of their marital status, student status, or financial dependency. This requirement is designed to expand access to health insurance for young adults who may not have other coverage options. The ACA does not mandate coverage for grandchildren or other dependents beyond children up to age 26. State laws may impose additional requirements, but the ACA itself is the primary federal regulation governing dependent coverage in employer-sponsored health plans. The ACA also includes provisions related to essential health benefits, preventive services, and other aspects of health insurance coverage, but the age 26 dependent coverage mandate is a specific and well-known component of the law. Therefore, extending coverage to grandchildren would exceed the ACA’s requirements.

To calculate the employer’s total cost for the year, we need to consider several factors: the base premium, the stop-loss premium, the claims paid, and the administrative fee. First, we calculate the total claims paid: \( \$30,000 + \$45,000 + \$60,000 + \$75,000 = \$210,000 \). Since the stop-loss threshold is \( \$50,000 \) per employee, only claims exceeding this amount are covered by the stop-loss insurance. The excess claims for each employee are: \( \$30,000 \) employee: \( \$0 \), \( \$45,000 \) employee: \( \$0 \), \( \$60,000 \) employee: \( \$10,000 \), \( \$75,000 \) employee: \( \$25,000 \). The total amount covered by the stop-loss insurance is \( \$10,000 + \$25,000 = \$35,000 \). Therefore, the employer pays \( \$210,000 – \$35,000 = \$175,000 \) in claims. The total cost for the year is the sum of the base premium, stop-loss premium, claims paid by the employer, and the administrative fee: \( \$100,000 + \$15,000 + \$175,000 + \$10,000 = \$300,000 \). The employer’s total cost for the year, considering all these factors, is \( \$300,000 \). This calculation reflects a comprehensive understanding of self-funded plan costs, including stop-loss insurance implications. It highlights the employer’s responsibility for claims up to the stop-loss threshold, the role of stop-loss insurance in mitigating high individual claims, and the inclusion of all relevant costs in determining the total expense of the group benefits plan.

Coordination of Benefits (COB) is the process by which insurance companies determine which plan pays first when an individual is covered by more than one health insurance plan. The primary plan pays first, and the secondary plan pays the remaining balance, up to its coverage limits. COB rules are used to prevent overpayment of claims and ensure that individuals do not receive more than 100% of their covered expenses. The “birthday rule” is a common COB rule that determines which parent’s plan is primary for a child; the plan of the parent whose birthday falls earlier in the calendar year is primary. The National Association of Insurance Commissioners (NAIC) has developed model COB regulations that many states have adopted. COB rules can be complex, and it’s important to understand them to ensure that claims are processed correctly.

The core of ERISA lies in protecting participants in employee benefit plans. One key aspect of this protection is ensuring that plan fiduciaries act solely in the interest of the participants and beneficiaries. This includes avoiding conflicts of interest. In this scenario, the HR Director’s dual role—overseeing the benefits plan and also having a financial stake in the wellness vendor—creates a direct conflict of interest. ERISA mandates that plan fiduciaries must act prudently and loyally, putting the interests of the plan participants above their own. The HR Director’s potential personal gain from favoring the wellness vendor directly contradicts this fiduciary duty. While promoting wellness programs can be beneficial, the process of selecting and contracting with vendors must be free from any self-dealing or conflicts of interest. Disclosing the conflict is a step in the right direction, but it doesn’t eliminate the underlying violation of ERISA’s fiduciary duty requirements. The director should recuse themselves from any decision-making regarding the vendor.

To calculate the employee’s annual contribution to the group health plan, we first determine the total annual premium. The employer pays 80% of the premium, leaving the employee responsible for the remaining 20%. The total annual premium is the monthly premium multiplied by 12. The employee’s monthly contribution is then multiplied by 12 to find the annual contribution. Total annual premium = Monthly premium × 12 = $1,250 × 12 = $15,000. Employee’s share of the premium = Total annual premium × Employee’s share percentage = $15,000 × 20% = $3,000. Therefore, the employee’s annual contribution to the group health plan is $3,000. The calculation considers the premium cost and the cost-sharing arrangement between the employer and the employee. It highlights the importance of understanding premium calculations and contribution splits in group benefits administration. The result provides a clear picture of the financial impact on the employee for their health coverage.

Wellness programs are designed to promote employee health and well-being. Participation in these programs should be voluntary to comply with regulations like the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA). While incentives can be offered to encourage participation, these incentives must be reasonable and not coercive. Penalizing employees who choose not to participate can be considered discriminatory and may violate these regulations. Simply tracking participation without consequences is acceptable. Offering rewards like gift cards or reduced premiums is a common practice. Mandating participation as a condition of employment is generally not permissible due to potential legal and ethical concerns.

This scenario involves “BioCorp,” a company with a high percentage of employees with chronic conditions. The most effective strategy to manage the financial risks associated with a high-risk employee population is to implement a comprehensive disease management program. Disease management programs focus on improving the health outcomes and reducing the costs associated with chronic conditions such as diabetes, heart disease, and asthma. These programs typically include proactive outreach to employees, education and self-management tools, care coordination, and medication adherence support. By actively managing chronic conditions, BioCorp can potentially reduce hospitalizations, emergency room visits, and other high-cost healthcare services. While increasing employee cost-sharing may reduce overall healthcare spending, it can also discourage employees with chronic conditions from seeking necessary care, potentially leading to worse health outcomes and higher costs in the long run. Switching to a fully insured plan would transfer the financial risk to the insurance carrier but may result in higher premiums. Eliminating benefits is not a sustainable or ethical solution.

First, we need to calculate the present value of the future premium savings. The annual premium savings is $500 per employee. The discount rate is 5%, and the period is 5 years. The formula for the present value of an annuity is: \[ PV = P \times \frac{1 – (1 + r)^{-n}}{r} \] Where: \( PV \) = Present Value \( P \) = Periodic Payment (Premium Savings) = $500 \( r \) = Discount Rate = 5% = 0.05 \( n \) = Number of Periods = 5 years \[ PV = \$500 \times \frac{1 – (1 + 0.05)^{-5}}{0.05} \] \[ PV = \$500 \times \frac{1 – (1.05)^{-5}}{0.05} \] \[ PV = \$500 \times \frac{1 – 0.7835}{0.05} \] \[ PV = \$500 \times \frac{0.2165}{0.05} \] \[ PV = \$500 \times 4.3295 \] \[ PV = \$2164.75 \] So, the present value of the future premium savings is $2164.75 per employee. Now, we need to determine if the wellness program is cost-effective. The initial investment is $150 per employee. We subtract the initial investment from the present value of the premium savings: \[ \text{Net Present Value} = \text{Present Value of Savings} – \text{Initial Investment} \] \[ \text{Net Present Value} = \$2164.75 – \$150 = \$2014.75 \] The net present value is $2014.75, which is positive. This means that the wellness program is cost-effective. Therefore, the net present value of the wellness program is $2014.75. This analysis is crucial for understanding the long-term financial benefits of investing in employee wellness. The calculation takes into account the time value of money and helps in making informed decisions about benefits program investments.

When an employer switches from a fully insured health plan to a self-funded plan, they assume direct responsibility for paying employee healthcare claims. Stop-loss insurance is crucial in mitigating the financial risk associated with self-funding. Specific stop-loss insurance provides coverage for individual claims exceeding a predetermined amount (e.g., \$100,000 per individual). Aggregate stop-loss insurance protects the employer against the risk of total claims exceeding a certain threshold for the entire group. This threshold is usually calculated based on the expected claims plus a buffer (e.g., 125% of expected claims). In this scenario, the expected annual claims for ‘Innovate Solutions’ are \$1,500,000. The aggregate stop-loss threshold is set at 125% of expected claims, which is calculated as: \[ 1,500,000 \times 1.25 = 1,875,000 \] Therefore, ‘Innovate Solutions’ would be responsible for paying claims up to \$1,875,000. Claims exceeding this amount would be covered by the aggregate stop-loss insurance. The specific stop-loss insurance, with a \$100,000 deductible per individual, would cover any individual claims exceeding this amount, regardless of whether the aggregate limit has been met. Understanding both types of stop-loss and their interaction is vital for managing financial risk in self-funded plans.

The scenario describes a situation where a company, “Innovate Solutions,” is considering a shift in its group benefits strategy due to rising healthcare costs and a desire to attract and retain talent in a competitive market. They are evaluating different funding models and benefit designs. To determine the most suitable approach, several factors must be considered. The company needs to balance cost containment with employee satisfaction and compliance with relevant regulations such as ERISA and the ACA. Fully insured plans offer predictable costs but may lack flexibility. Self-funded plans offer greater control and potential cost savings but also greater risk. Level-funded plans offer a middle ground, combining some of the benefits of both. The company’s demographic profile, claims history, and risk tolerance are crucial in making this decision. Additionally, the benefits broker’s role is to provide expert advice, negotiate with carriers, and ensure compliance. The best course of action involves a thorough analysis of these factors, considering both short-term and long-term implications. This includes evaluating employee preferences through surveys or focus groups, conducting a detailed claims analysis to understand cost drivers, and comparing different funding models and benefit designs. The ultimate goal is to create a sustainable and competitive benefits package that meets the needs of both the employer and employees while remaining compliant with all applicable laws and regulations.

To determine the employee’s share of the premium, we first calculate the total annual premium. The monthly premium is \$350, so the annual premium is \( \$350 \times 12 = \$4200 \). The employer contributes 75% of this total premium, which amounts to \( \$4200 \times 0.75 = \$3150 \). The remaining portion of the premium is the employee’s responsibility. Therefore, the employee’s annual share is \( \$4200 – \$3150 = \$1050 \). Since the employee pays this amount in bi-weekly installments, we need to determine the number of bi-weekly pay periods in a year. There are 52 weeks in a year, so there are \( \frac{52}{2} = 26 \) bi-weekly periods. Finally, to find the amount deducted from each bi-weekly paycheck, we divide the employee’s annual share by the number of bi-weekly periods: \( \frac{\$1050}{26} \approx \$40.38 \). Therefore, the amount deducted from Imani’s bi-weekly paycheck for her health insurance premium is approximately \$40.38.

The key here is understanding the nuances of ERISA’s fiduciary responsibilities and how they apply to different roles within a company’s benefits administration. While the CFO generally oversees the company’s finances, including benefit plan funding, and the HR director manages the overall benefits program, neither of these roles automatically makes them fiduciaries under ERISA. Fiduciary status is determined by the actual functions performed, not just the job title. In this scenario, the Benefits Manager, because they exercise discretionary authority in the administration of the plan, including interpreting plan documents and making decisions on eligibility and claims, is the most likely to be considered a fiduciary under ERISA. A third-party administrator (TPA) can also be a fiduciary if the TPA has control or authority over the management of the plan or its assets, or if the TPA provides investment advice for a fee. Because the TPA is handling claims processing and enrollment, they are performing administrative functions, not necessarily fiduciary functions. Therefore, the Benefits Manager holds the primary fiduciary responsibility for the group health plan in this situation.

When an employer offers both a Health Savings Account (HSA) and a Flexible Spending Account (FSA), understanding the permissible combinations and their implications is crucial. A general-purpose FSA can only be offered alongside an HSA if it is structured as a limited-purpose FSA (LPFSA) or a post-deductible FSA. A limited-purpose FSA is specifically designed to cover only dental and vision expenses, thereby avoiding disqualification for HSA eligibility. A post-deductible FSA only becomes available after the minimum deductible for an HSA has been met. A dependent care FSA does not affect HSA eligibility, as it covers dependent care expenses, not medical expenses. Offering a general-purpose FSA alongside an HSA would disqualify employees from contributing to the HSA because the general-purpose FSA would cover medical expenses before the minimum deductible is met, violating HSA rules. In this scenario, the employer’s offering of a general-purpose FSA alongside an HSA without restrictions disqualifies employees from contributing to the HSA.

To determine the employee’s contribution, we first need to calculate the total premium cost and then subtract the employer’s contribution. The total premium is the sum of the premiums for single, employee + spouse, employee + child(ren), and family coverage, weighted by the number of employees in each category. Total premium cost = (Number of single employees * Single premium) + (Number of employee + spouse employees * Employee + spouse premium) + (Number of employee + child(ren) employees * Employee + child(ren) premium) + (Number of family employees * Family premium) Total premium cost = (150 * $300) + (80 * $600) + (50 * $500) + (20 * $800) = $45,000 + $48,000 + $25,000 + $16,000 = $134,000 The employer contributes 75% of the total premium cost. Therefore, the employer’s contribution is: Employer’s contribution = 0.75 * Total premium cost = 0.75 * $134,000 = $100,500 To find the total employee contribution, subtract the employer’s contribution from the total premium cost: Total employee contribution = Total premium cost – Employer’s contribution = $134,000 – $100,500 = $33,500 Therefore, the total amount contributed by the employees is $33,500. This represents the aggregate contribution from all employees across the different coverage tiers. The calculation reflects the shared responsibility between the employer and employees in funding the group health insurance plan, with the employer covering a substantial portion to make the benefits accessible and affordable for the workforce. This approach helps in attracting and retaining talent while ensuring employees have access to necessary healthcare coverage.

The key to answering this question lies in understanding the interplay between ERISA, state mandates, and the specifics of a self-funded plan. ERISA generally preempts state laws that “relate to” employee benefit plans. However, there’s an exception for state laws that regulate insurance. Self-funded plans, because they don’t purchase insurance, are generally protected from state insurance mandates under ERISA’s deemer clause. This clause states that an employee benefit plan shall not be deemed to be an insurance company or other insurer for purposes of state laws purporting to regulate insurance companies or insurance contracts. Therefore, a state mandate requiring specific benefits (like fertility treatments) in insured plans typically does *not* apply to a self-funded plan. However, the organization must still adhere to all other applicable federal regulations, including those related to non-discrimination and reporting requirements under ERISA and other relevant federal laws. The plan sponsor retains significant responsibility for compliance and administration, even when outsourcing some functions. The organization’s domicile is irrelevant; what matters is the plan’s funding mechanism and ERISA preemption.

The correct answer lies in understanding the interplay between ERISA regulations and state laws concerning fully insured group health plans. ERISA generally preempts state laws that “relate to” employee benefit plans. However, there’s an important exception: the “insurance savings clause.” This clause carves out an exception to ERISA preemption, allowing states to regulate insurance. Therefore, state laws that regulate insurance companies or insurance contracts within a fully insured plan are generally not preempted by ERISA. This includes state-mandated benefits, which require insurance policies to cover specific services or treatments. The key is that the state law must be genuinely regulating insurance, not the employer’s benefit plan directly. A self-funded plan, however, is not subject to state insurance regulation due to ERISA preemption, as the employer directly assumes the risk rather than purchasing insurance. Level-funded plans are a hybrid; while they resemble fully insured plans, they often contain elements of self-funding, and the degree to which state insurance laws apply can be complex and depend on the specific plan structure and state regulations. ASO plans are explicitly not insurance plans, and state insurance regulations would not apply to them in the same way.

To determine the employee’s share of the premium, we first need to calculate the total annual premium cost. The monthly premium is \$600, so the annual premium is \( \$600 \times 12 = \$7200 \). The employer covers 75% of the premium, meaning the employee is responsible for the remaining 25%. Thus, the employee’s annual share is \( 0.25 \times \$7200 = \$1800 \). The employee’s share is then distributed across 24 pay periods (bi-weekly). The bi-weekly deduction can be calculated as \( \frac{\$1800}{24} = \$75 \). Now, we must account for the FSA contribution. The employee contributes \$100 per pay period to their FSA. This FSA contribution reduces the taxable income, but it does not directly offset the premium deduction. Therefore, the total bi-weekly deduction from the employee’s paycheck is the sum of the premium deduction and the FSA contribution, which is \( \$75 + \$100 = \$175 \). This represents the total amount deducted from each paycheck for both the health insurance premium and the FSA contribution. This calculation reflects the actual cash outflow from the employee’s paycheck, combining both the premium responsibility and the FSA savings strategy.

The scenario involves a company navigating the complexities of offering group health benefits while adhering to both federal and state regulations. The key is understanding the interplay between ERISA, ACA, and state-specific mandates, particularly in the context of self-funded plans. ERISA generally preempts state laws that “relate to” employee benefit plans, but there are exceptions, especially concerning insurance regulation. The ACA mandates certain essential health benefits, but states can impose additional requirements on insured plans. Self-funded plans are directly regulated by ERISA, offering them more flexibility from state insurance laws, but they are still subject to ACA requirements and certain state laws that don’t “relate to” the plan in a way that triggers ERISA preemption (e.g., generally applicable laws). In this case, the company’s self-funded plan needs to comply with ACA’s essential health benefits, but is generally shielded from state-specific insurance mandates due to ERISA preemption, unless the state law falls under an exception. However, the company must still adhere to state laws that don’t unduly interfere with the plan’s uniform administration. Therefore, the company needs to ensure compliance with ACA requirements and carefully analyze state laws to determine which ones apply to its self-funded plan, focusing on whether those laws are preempted by ERISA or fall under an exception.

This question tests the understanding of the Employee Retirement Income Security Act (ERISA) and its implications for employers who sponsor group health plans, particularly regarding fiduciary responsibilities and prohibited transactions. ERISA establishes standards of conduct for plan fiduciaries, who are individuals or entities that exercise discretionary authority or control over the management or assets of an employee benefit plan. Fiduciaries have a duty to act prudently, loyally, and solely in the interest of plan participants and beneficiaries. They must also diversify plan investments to minimize the risk of large losses and avoid engaging in prohibited transactions. Prohibited transactions are certain dealings between a plan and a “party in interest” (which includes employers, plan fiduciaries, and service providers) that could potentially harm the plan or its participants. Examples of prohibited transactions include the sale, exchange, or leasing of property between the plan and a party in interest, the lending of money or other extension of credit between the plan and a party in interest, and the transfer of plan assets to a party in interest. In this scenario, “Apex Corporation” used funds from the employee health plan to pay for company operating expenses. This constitutes a prohibited transaction because it involves the transfer of plan assets to the employer, which is a party in interest. Such a transaction violates ERISA’s fiduciary duty requirements and could subject Apex Corporation and its fiduciaries to penalties, including civil and criminal sanctions.

To calculate the required annual contribution, we must first determine the total annual healthcare costs. This is achieved by multiplying the number of employees by the per-employee cost: Total Annual Healthcare Costs = Number of Employees × Per-Employee Cost Total Annual Healthcare Costs = 450 employees × $9,500/employee = $4,275,000 Next, we determine the employer’s share of these costs. The employer covers 80% of the total costs, so: Employer’s Share = Total Annual Healthcare Costs × Employer’s Coverage Percentage Employer’s Share = $4,275,000 × 0.80 = $3,420,000 The remaining cost is covered by employee contributions. To find the total employee contribution, subtract the employer’s share from the total annual healthcare costs: Total Employee Contribution = Total Annual Healthcare Costs – Employer’s Share Total Employee Contribution = $4,275,000 – $3,420,000 = $855,000 To determine the annual contribution required from each employee, divide the total employee contribution by the number of employees: Annual Contribution Per Employee = Total Employee Contribution / Number of Employees Annual Contribution Per Employee = $855,000 / 450 employees = $1,900/employee Therefore, each employee must contribute $1,900 annually to cover their portion of the healthcare costs. This calculation ensures that the employer’s and employees’ contributions collectively meet the total healthcare expenses for the group. The allocation is based on the agreed-upon cost-sharing arrangement, with the employer covering a substantial portion to attract and retain employees while employees contribute a smaller share to maintain affordable coverage. The final amount reflects a balanced approach to funding the group healthcare plan.