Quick Summary: Employee Benefits Compliance ensures adherence to laws, avoids potential penalties, builds employee trust, prioritizes fair treatment, and protects company reputation. 

• Key Compliance Areas:
  • ERISA
  • Tax - Internal Revenue Code Requirements
  • ACA Compliance, including:
    • Summary of Benefits & Coverage (SBCs)
    • Offers of Coverage
    • ACA Plan Affordability
  • COBRA Administration
  • Non-Discrimination Testing
  • Employee Data Security

Hiring third-party specialists for comprehensive management, staying updated with legislation, implementing necessary changes, and managing reporting to government agencies can help provide expertise and cost-effective solutions for businesses lacking in-house resources. However, the employer is ultimately responsible for all compliance requirements so outsourcing the task does not mean the employer can forego oversight. 

Crafting a competitive employee benefits package is only half the battle for modern businesses. The employee plan compliance obligations have become much more comprehensive and complex in recent years. Therefore, it is crucial to make sure these benefits are administered in compliance with the law. 

Missteps in compliance can be costly, with potentially significant penalties. That's why World Insurance has compiled an employee benefits compliance overview highlighting key requirements every employer should consider, including areas employers should continue to oversee when working with outside compliance vendors. 

World Insurance's Gap Assessment builds on this overview, giving employers a practical way to measure their program against these requirements and stay engaged in oversight—even when day-to-day administration is handled by an outside vendor. 

What is Employee Benefits Compliance?

Benefit compliance refers to the adherence to the federal, as well as some state, and local regulations that govern workplace benefits packages. ERISA is the federal law that governs employee benefits and preempts (there are some exceptions) state and local laws that also seek to regulate employee benefits. 

Compliance with employee benefits involves an understanding of the employee benefits and even employment laws (more on those soon). Each of these laws has specific requirements that affect how employers should offer health insurance, retirement plans, and other benefits. 

Maintaining compliance can help businesses:

• Avoid Potential Legal Consequences and Penalties: Non-compliance can lead to severe penalties, including fines and legal action. These can end up costing businesses thousands—if not millions—of dollars, depending on the penalty. The larger concern, however, is not enforcement from the government, but issues that might arise if employee claims are mishandled. Then the compliance issues can exacerbate the potential downside. 
• Grow at Scale: As the organization grows and the workforce diversifies, having a robust compliance structure in place can make it easier to integrate new employees and manage benefits across different regions or countries. 

Administration of Employee Benefits

Benefits administration plays an important role in ensuring compliance. 

First and foremost, having an ongoing process makes benefits management of compliance an automatic part of the process. That will ensure benefits comply with the applicable laws, and documents demonstrating that are being kept.

These records in particular are a must for regulatory reviews, compliance checks, and additional evidence that plans are being maintained properly in the event of any challenge. As compliance laws and benefits change, administrators are able to make adjustments to prevent the organization from falling behind. 

Effective administration also involves clear and consistent communication with employees about their benefits. This serves a dual purpose: to aid in compliance and make sure eligible employees are engaging with their benefits. Using benefits administration technology can also help support these goals.

Employee Benefits Compliance Gap Assessment

Now, for what you've been waiting for. 

Consider this your ultimate employee benefits compliance checklist to help make sure your program meets legal standards. 

• Adherence to ACA Requirements
  • All health plans must meet the minimum standards set by the Affordable Care Act (ACA).
• Summary of Benefits and Coverage
  • Distribute the Summary of Benefits and Coverage (SBC) and other required notices to employees during enrollment and upon any significant changes to the plan. 
• Plan Affordability Checks
  • Review health plan costs to ensure they meet the ACA's affordability threshold. The ACA requires employee contributions to not exceed a specific percentage of their household income. 
• ERISA Guidelines Adherence
  • Verify that all retirement plans comply with the Employee Retirement Income Security Act (ERISA) requirements. Conduct annual audits of retirement plans to correct any discrepancies before they become compliance issues. 
• FMLA
  • Benefits should align with the Family and Medical Leave Act (FMLA) and applicable state leave laws. This allows eligible employees to take unpaid, job-protected leave for specified family and medical reasons. 
• COBRA Administration
  • The Consolidated Omnibus Budget Reconciliation Act (COBRA) provides health coverage for qualifying events like termination. It's your responsibility to send timely COBRA notifications to eligible employees and their beneficiaries explaining their rights and obligations. 
• Non-Discrimination Testing
  • There are required non-discrimination tests for all benefit plans. These help make sure that your plans do not favor highly compensated employees over others. 
• Employee Benefits Security
  • The handling of employee health information must comply with the Health Insurance Portability and Accountability Act (HIPAA) privacy rules. Similarly, other security measures should be taken to protect sensitive employee data. 

Outsourcing Employee Benefit Compliance Services

It's possible for organizations to rely on a benefits administrator or a benefits manager within the Human Resources (HR) department for compliance. However, this job can be very complex and time-consuming, especially considering that these positions often have many other day-to-day responsibilities. 

That's why outsourcing employee benefit compliance services can be a strategic decision for many businesses. Look for a third-party service provider that specializes in benefits administration and compliance. They can offer professional advice and find solutions that help your benefits program meet regulatory requirements. 

They will be your partner throughout:

1. Assessment and Planning: The service provider evaluates the company's current benefits programs and identifies areas where compliance is lacking. 
2. Implementation: The provider implements necessary changes to streamline benefits administration and compliance. 
3. Ongoing Management and Monitoring: They take on the responsibility of staying up to date with changes in legislation and adjusting the benefits programs as needed. 
4. Reporting: The service provider can even handle all the necessary reporting to government agencies. 

Using employee benefits compliance services can be especially helpful for businesses that lack the in-house resources necessary to manage benefits programs. It can also be more cost-effective in the long run.

Even so, outsourcing administration doesn't outsource responsibility—the employer remains accountable, which is why a periodic Gap Assessment is a useful check: it measures your current program against ERISA, ACA, COBRA, and the other areas outlined here, flags where oversight is needed, and gives you documentation to show that compliance is being actively managed rather than assumed. 

At World Insurance, our compliance specialists provide ongoing compliance consulting—including a Gap Assessment—to keep you apprised of changing legislation and regulations, and to give you the tools to stay engaged in oversight whether you manage compliance in-house or through a vendor.

Contact us today to learn more about our Gap Assessment and other benefits compliance services.