An Introduction to Employee Benefits Compliance
Employee Benefits Compliance is a growing concern for organizations across the country - particularly smaller organizations who are often eligible for certain exemptions
Employee benefits compliance is a growing concern for organizations and their human resources teams across the country – particularly smaller organizations that are often eligible for certain exemptions, which can be tricky to understand or navigate without a full HR team and specialists in the area of benefits administration.
As the Department of Labor has increased audits, many workplaces may be facing fines, penalties, loss of tax status, and other consequences for a failure to be fully compliant with all employee benefits laws. This article is intended to provide a brief overview of some of the items that should be on your checklist – but it is not intended to be exhaustive or offer legal advice. Make sure you know state and local laws for employee document retention, too
We recommend walking through all notice requirements listed in this article with your health insurance broker or carrier to figure out who is responsible for each notice distribution. Read HR's Guide to Compliance to learn about more compliance issues.
Who Sets the Laws for Benefits Compliance?
The rules and regulations benefits administrators must adhere to in the US come from three sources:
The Federal Government
Health Insurance Plans and Sponsors are subject to a number of federal laws. These include the Consolidated Omnibus Budget Reconciliation Act (COBRA), the Employee Retirement Income Security Act (ERISA), the Health Insurance Portability and Accountability Act (HIPAA), and the Patient Protection and Affordable Care Act (ACA).
The laws that apply to health plans vary from state to state. However, the scope of these regulations and their reporting requirements are limited in most cases and may not contain disclosure and reporting requirements.
It’s important to know what is written the contract you signed with your health insurance carrier so that you can comply with those provisions. If it isn't readily available or if there are any questions about its contents then ask for help from your broker or carrier. It often contains obligations like a minimum amount the company must contribute to the health plan (often 50% of employee-only coverage) and a definition of which employees are eligible to participate in the health plan. It also most likely contains a minimum participation requirement, meaning that a certain minimum percentage (generally between 50% - 75%) of your employees must enroll in the plan for the carrier to continue it.
Individuals and human resources administrators managing benefits must follow these fiduciary requirements:
Ensure plan participants receive the benefits promised
Fund benefits according to the law and plan rules
Refrain from conflict of interest and demonstrate prudence
Report and disclose information on the operations and financial conditions of the plan according to the government
Health Care Reform: Employee Notice of Exchange
This requirement applies to all employees who are subject to the Fair Labor Standards Act (FLSA). This notice must be provided to all employees – new hires and current – with a written notice about the health care reform law’s health insurance exchanges.
The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) is a federal law that allows employees and their dependents to continue health insurance coverage if they would have lost it otherwise. COBRA is most commonly offered when an employee separates from the company, but there are many instances where it must be offered. Coverage lasts for a limited amount of time and requires those losing coverage to pay the full premium to the employer.
For organizations with at least 20 employees, notices must be provided within 90 days of beginning coverage and must be written in plain language. These notices include the initial Consolidated Omnibus Budget Reconciliation Act (COBRA) notice, an Election Notice or Qualifying Event Notice, and any other applicable notices.
Note: Many states have their own "mini-COBRA" laws for companies with 2-19 employees
Required notices include:
The Initial COBRA Notice
COBRA Notice & Election Form
Other Notices Based on Circumstances
ERISA: Summary Plan Description
The Employee Retirement Income Security Act (ERISA) is a law that sets standards for companies that sponsor health plans. The goal of these standards is to protect the employee plan participants and beneficiaries and inform them of their rights and obligations and must be provided for all ERISA-covered benefits, such as medical, dental, vision, life, disability, HRA, FSA, etc.
Notices under the ERISA include:
Summary Plan Description (SPD)Summary Annual Report (SAR)
Notice of Creditable/Non-Creditable Prescription Drug Coverage
Official Plan Document
Children’s Health Insurance Program (CHIP) Notice
Summary of Material Modifications (SMM)
Newborns’ and Mothers’ Health Protection Act (NMHPA) Notice
Summary of Material Reduction in Covered Services or Benefits
Notice of Patient Protections
Women’s Health and Cancer Rights Act (WHCRA) Notice
Children’s Health Insurance Program Reauthorization Act Notice (CHIPRA)
This applies to organizations that maintain group health plans in countries that provide premium assistance subsidies under a Medicaid plan or CHIP. Notices must be given upon enrollment and annually.
Newborns’ and Mothers’ Health Protection Act (NMHPA)
All organizations that offer maternity benefits must provide a statement that a stay for standard delivery must be no less than 48 hours and 96 hours for a cesarean section if the plan provides maternity or newborn infant care.
Women's Health and Cancer Rights Act (WHCRA)
Plans that provide medical and surgical mastectomy benefits are required to notify participants that these benefits are available. This is applicable to all organizations that offer the benefits.
Family and Medical Leave Act (FMLA)
For groups of over 50 people, the FMLA provides job-protected leave for special situations, or specific family and medical-related reasons. Organizations must maintain group health coverage during the leave at the same level of coverage.
Genetic Information Nondiscrimination Act (GINA)
GINA prohibits group health plans and insurers from:
Adjusting group premium or contribution amounts based on genetic material
Requiring or requesting individuals to undergo genetic testing
Collecting genetic information in connection with enrollment or for underwriting purposes
HIPAA Privacy Policies and Practices
The Health Insurance Portability and Accountability Act (HIPPA)is an amendment to the ERISA. Under HIPAA, health plans are required to establish written privacy notices and procedures regarding protected health information, including but not limited to: permitted uses and disclosures, authorization requirements, complaints procedures, privacy safeguards, and sanctions for violations.
Medicare Part D Notice of Creditable Coverage
This applies to any group health plan sponsors who are eligible for Medicare Part D coverage. Organizations must disclose to CMS whether the plan is creditable on an annual basis and upon any change that affects the status.
Mental Health Parity and Addiction Equity Act (MHPAEA)
This applies to group health plans offering mental health and substance use disorder benefits that have 50 or more employees.
Disclaimer: This article is not intended to be an exhaustive guide to benefits administration compliance nor does it constitute legal advice. There are a number of other compliance measures such as reporting requirements (e.g. W-2 reporting, Form 5500, ACA reporting), as well as a number of other key requirements that differ depending on the size of the organization.
A tool like GoCo can help busy HR teams keep track of all of their compliance requirements, upcoming deadlines and more. Check out our guide to payroll compliance to learn more!
How to Fill Out Form W-4 [+2023 Changes]