Highlights
- Employee benefits compliance involves navigating federal and state regulations, such as ACA, HIPAA, and ERISA.
- To avoid fines and penalties, you need to stay up to date with regulatory changes, deadlines, and reporting requirements.
- By partnering with LL Roberts you can minimize risk and keep your business compliant. Contact us today to learn more.
Keeping up with the winding regulations of employee benefits compliance can be challenging for business owners. From missed deadlines to misclassification errors, the scope of non-compliance is broad and can expose your business to costly fines and legal disputes.
To help you stay ahead, this article provides an overview of essential laws and practical tips for avoiding common legal mistakes.
Let’s dive in!
Key Employee Benefits Compliance Areas
When it comes to managing employee benefits, companies are responsible for adhering to various federal and state regulations. These are the key compliance areas that require careful attention:
- Affordable Care Act (ACA). If you employ 50 or more full-time workers (or equivalents), you must offer affordable, minimum-value health coverage to them and their dependents.
- Health Insurance Portability and Accountability Act (HIPAA). HIPAA’s privacy and security rules protect the confidentiality and integrity of individuals’ health information. If you sponsor group health plans, you must implement safety measures to prevent unauthorized access, use, or disclosure of protected health information (PHI).
- Consolidated Omnibus Budget Reconciliation Act (COBRA). COBRA grants employees and their families the right to continue group health coverage for a limited period after job termination, divorce, or other qualifying events. As an employer, you must provide timely and accurate COBRA notices and administer the continuation of coverage according to regulations.
- Employee Retirement Income Security Act (ERISA). ERISA sets standards for employee benefit plans, including retirement plans, health plans, and other welfare benefit programs. For your business, this involves complying with specific reporting, disclosure, and fiduciary requirements to ensure the proper administration and protection of employee benefits.
Common Pitfalls when Managing Employee Benefits Compliance – And How to Avoid Them
Missing Deadlines for Required Notices
Notices keep your employees informed about their rights, responsibilities, and available options regarding their employee benefits. They include things like the Summary Plan Description (SPD), Summary of Benefits and Coverage (SBC), COBRA election notices, and more. Each of them has specific deadlines and requirements that you need to comply with.
If you fail to provide these notices on time, you could face heavy fines and penalties. At the same time, if your employees don’t receive proper notifications they may have grounds for legal action, which could result in costly lawsuits and settlements.
Consider these best practices to avoid this:
- Set up a calendar or tracking system to monitor all upcoming deadlines and ensure timely distribution of notices.
- Regularly review and update notice templates to ensure compliance with the latest regulations.
- Keep records of all notices sent, including distribution dates and recipient confirmations.
Non-compliance with ACA Requirements
Non-compliance with the ACA, including failing to provide coverage, offering inadequate coverage, or inaccurate reporting, can result in penalties from the Internal Revenue Service (IRS). The specific amounts vary each year, but employers who fail to offer affordable, minimum-value coverage can expect to pay $4,350, per employee.
How to avoid this?
- Consider partnering with experienced professionals who specialize in ACA compliance to ensure that your organization remains compliant with all applicable regulations.
Employee Misclassification Issues
Misclassifying workers as independent contractors when they should be classified as employees not only violates labor laws: it also deprives employees of the benefits they are rightfully entitled to.
Businesses that misclassify employees may be required to pay back taxes, overtime wages, and benefits that should have been provided to misclassified employees. Additionally, you may face penalties, interest charges, and legal fees.
Best practices to avoid misclassification issues:
- Carefully evaluate the nature of your working relationships with individuals. The IRS and DOL provide guidelines and tests to determine whether a worker should be classified as an employee or an independent contractor.
- Regularly review worker classifications and seek professional guidance if you are unsure about how to classify individuals correctly.
HIPAA Privacy and Security Violations
Keeping employees’ protected health information (PHI) private and safe is vital for benefits compliance. As a business owner, you want to avoid penalties and ensure your employees continue to trust your company.
Do this to improve privacy and security:
- Control the access to facilities and workstations where PHI is stored.
- Implement measures to protect PHI, such as encryption, firewalls, and access controls.
- Have policies, procedures, and training programs in place to ensure employees understand and follow HIPAA privacy and security rules.
- Conduct regular risk assessments to identify potential vulnerabilities and develop mitigation strategies.
Errors in COBRA Administration
One of the most common pitfalls is mishandling COBRA eligibility rules. As an employer, you must identify qualified beneficiaries and ensure they receive the proper notifications and election opportunities. Failing to offer COBRA coverage to eligible individuals can result in costly penalties and legal actions.
Another critical area is COBRA notice requirements. You must provide several types of notices, including the initial COBRA election notice, premium payment information, and termination of coverage notifications. These notices must be timely, accurate, and compliant with specific content and delivery requirements. Inadequate or incorrect notices can invalidate COBRA coverage and expose employers to liability.
Best practices to avoid this
- Implement robust processes for managing eligibility, notifications, and record-keeping.
- Partner with experienced benefits professionals who can provide guidance and support to navigate COBRA compliance.
Inaccurate or Incomplete Reporting
Failing to file required forms or provide comprehensive plan documentation can result in significant penalties and legal consequences. ACA compliance, for instance, requires submitting reporting forms 1094-C and 1095-C.
Inaccuracies can also occur when creating (and maintaining) Summary Plan Descriptions (SPDs). These documents must reflect the benefits offered, eligibility requirements, and other plan details. Any discrepancies can create legal issues and potential employee disputes.
Best practices to avoid this:
- Implement a centralized system for storing and managing all benefit-related documents, including plan documents, SPDs, and reporting forms.
- Use automated reporting tools to minimize human error.
Overlooking State-Specific Benefit Mandates
In addition to federal regulations, each state has its own set of rules and requirements for employee benefits. State regulations impose unique coverage requirements for specific treatments or conditions, continuation provisions, and reporting obligations.
Here’s how to comply with state-specific requirements:
- Stay informed about updates and changes impacting benefits laws, especially if your business operates across multiple states.
4 Strategies for Compliance Success
Achieving and maintaining employee benefits compliance requires a proactive approach. Here are some general strategies you should keep in mind:
- Regular audits and monitoring. Periodically audit your benefits plans, policies, and procedures. This will help you identify potential compliance gaps or areas of non-compliance.
- Keep accurate and detailed documentation. This includes record-keeping for employee classifications, benefits enrollments, plan documents, notices, and communications.
- Train your staff. Ensure that your HR personnel and benefits administrators are well-versed in compliance requirements and best practices for benefits administration. This helps minimize errors and oversights and empowers your team to make informed decisions.
- Partnering with compliance experts. These professionals stay up to date with regulatory changes and can help you navigate benefits compliance while minimizing risks and liabilities.
Keep Your Business Safe with LL Roberts
Benefits compliance is a critical responsibility for businesses of all sizes. However, dealing with so many regulations and requirements can be overwhelming.
By seeking expert guidance, companies can avoid serious non-compliance issues that may negatively impact their operations.
At LL Roberts, we empower companies of all sizes with comprehensive HR services, including strategic employee benefits solutions. We help you attract and retain talent with affordable, competitive benefits while keeping your business compliant with all applicable regulations and handling administrative tasks.
Don’t leave your business exposed to the legal pitfalls of non-compliance. Contact us today and learn how we can help your business.
