For many organizations that have required benefits for their employees, compliance with those benefits is extremely important.

Compliance in the benefits industry

To stay up-to-date with the changing regulations pervasive in the sector, it's vital to have a comprehensive compliance strategy for the company's employee benefits programs. HR professionals are on the front lines of this struggle and know well how tight these standards can be in some cases.

There is a wide range of employee benefit laws that must be met and it can be hard for providers and the company to keep up with the shifting requirements. The Employee Benefits Security Administration (ESBA) is one of the regulatory bodies that conduct audits through the Department of Labor (DOL). Let's take a closer look at why working towards a compliant employee benefits program is important and the consequences of falling short.

Legislation

Here are some of the most noteworthy government acts and legislation that focus on employee compliance:

Affordable Care Act (ACA)

The Affordable Care Act is a comprehensive and holistic piece of legislation enacted in March 2010 that boosted healthcare reform. While there are many provisions of the law, it created certain complex requirements for large employers, complete with penalty rules regarding employee benefits. The Department of Labor reports that the ACA impacted benefits in the following ways:

• Extending dependent health coverage up to age 26.
• Prohibiting pre-existing condition exclusions for all individuals.
• Requiring easy-to-understand summaries of a health plan's benefits and coverage.
• Mandating that employers provide notice of coverage options for new hires within 14 days of being hired.
• Providing incentives to promote employer wellness programs.

There are more pieces of the act that influence an employee benefits program, but the act generally encourages businesses to make their benefit offerings more comprehensive.

Employment Retirement Income Security Act (ERISA)

For HR professionals, paying close attention to the Employee Retirement Income Security Act (ERISA) is crucial as it directly affects employee welfare benefit plans. Initially enacted in 1974, this federal law establishes essential guidelines for privately established retirement and health plans, setting minimum standards. ERISA mandates organizations offer adequate protection for employees participating in such plans, according to the DOL. Let's look at some example requirements from ERISA:

• Provides participants with plan information.
• Sets minimum standards for participation.
• Includes vesting.
• Offers benefit accrual.
• Ensures that fiduciary responsibilities are taken on by those who manage and control plan assets.
• Requires plans to establish a grievance and appeals process for participants.
• Gives participants the right to sue for benefits and breaches of fiduciary duty.
• Establishes the Pension Benefit Guaranty Corporation (PBGC).

Note that ERISA applies to private industry only, and not to government entities and churches.

Family and Medical Leave Act (FMLA)

Another act that significantly impacts the employee benefits sector is FMLA. This act grants eligible employees working for covered employers the right to take job-protected, unpaid leave for specific family and medical reasons, as defined by the DOL. For example, an employee should have twelve workweeks of leave in one year for the following reasons:

• The birth of a child.
• If adoption occurs, including foster care.
• If an employee's close family member (spouse, child or parent) has a serious health condition.
• If the employee has a serious health condition.
• Any qualifying exigency arising out of the fact that the employee's spouse, son, daughter or parent is a covered military member on "covered active duty."

In this case, FMLA applies to both public agencies and private joint employers. Also, note that FMLA not only promotes time off for employees who are going to become parents and who are physically ill but also for those who struggle with mental health disorders. In addition, a caretaker may take days off to care for a dependent or spouse who has mental health problems.

Consolidated Omnibus Budget Reconciliation Act (COBRA)

Many in the benefit provider industry are well acquainted with COBRA, as it's an important piece of legislation for healthcare benefits. According to the DOL, the act enforces that workers and their families who lose their health benefits have the right to choose to continue group health benefits provided by their group health plan for limited periods of time. This includes:

• The transition between jobs.
• A reduction in the hours worked.
• The transition between jobs.
• A death in the family.
• Divorce.
• Other life events.

COBRA applies to all group health plans maintained by private-sector employees with 20
or more employees and allows employees the chance for a temporary extension of their coverage. This is called continuation coverage and applies in certain circumstances.

Health Insurance Portability And Accountability Act (HIPAA)

Often thought to be limited to the healthcare industry, HIPAA also offers protection for those who have coverage under group health plans. It prohibits "discrimination against employees and dependents based on their health status; and allows a special opportunity to enroll in a new plan to individuals in certain circumstances."

There is a wide swath of legislation and laws that apply to employee benefits compliance, and the list goes beyond the main regulations discussed here.

How to remain competitive without fees

Compliance with the variety of regulations surrounding employee benefits is so important that the government has provided general assistance with meeting these standards. When the laws aren't upheld, the government applies fees that can be costly. Here are some valuable tools that the government provides that can assist employers in avoiding compliance fees.

Compliance Assistance Guide - Appendix A: Self-Compliance Tools

The U.S. DOL has created a self-compliance tool that provides guidance for Part 7 of ERISA. The agency reports are useful for:

• Group health plans.
• Plan sponsors.
• Plan administrators.
• Health insurance issuers.

Keep in mind that the tool was last updated before certain acts like the Consolidated Appropriations Act, 2021 (CAA). In addition, it can offer suggestions and best practices but is not intended to provide guaranteed compliance.

Interactive website

Another resource that the U.S. Department of Labor's Employee Benefits Security Administration (EBSA) has provided to employers and health insurance issuers is a dedicated website called "The Health Benefits Advisor for Employers." The advisor tool can offer tailored advice based on certain provisions and legislations, but the site notes that the information should not be considered legal advice.

Reporting/disclosure guide for employee benefits plans

EBSA, in association with Pension Benefit Guaranty Corporation (PBGC), prepared a guide to assist providers of employee benefit plans in staying compliant with certain requirements. Here is a quick breakdown of the three chapters in the guide:

1. The guide focuses on an "overview of the most common disclosures that administrators of employee benefit plans are required to furnish to participants, beneficiaries, and certain other individuals."
2. The next chapter goes into an overview of reporting and disclosure requirements for defined benefit pension plans.
3. Lastly, the guide finishes with information about Form 5500 and Form M-1 Annual Reporting requirements.

Fiduciary responsibilities

Another general compliance assistance tool offered by the DOL, this guide gives employer benefit providers information about their fiduciary responsibilities that are applicable to health plans. This tool is most helpful for small businesses and was created to boost the education of employee benefit requirements under the Small Business Regulatory Enforcement Fairness Act of 1996.

Fees and consequences

The DOL frequently audits organizations to ensure that they are complying with employee benefit requirements. If the business is found in violation of any laws, the government could potentially issue fines of up to thousands of dollars per day if the lapse continues. In addition, noncompliance can result in employees bringing a lawsuit against the organization.

In 2023, the DOL announced its final rule adjusting penalties for non-compliance, an action that is required annually by The Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015. This adjustment is mandatory each year in order to adjust for inflation and other economic factors. Take a look at the Federal Register's yearly ruling for more comprehensive information. Let's break down a small sampling of the fees that will be applied if a violation is found:

• HIPAA penalties: Highest tier including willful neglect uncorrected within 30 days is  $1,919,173 ($1,806,757)
• FMLA penalties: $200 per day and $2,000 in the aggregate for each employee. 
• COBRA notices: Tax penalty equal to $100 per day.

The compliance fees and fines are complex and change annually, which is why business owners may need external support to remain competitive and compliant.

Actuarial services

At Lewis & Ellis, our experts offer compliance support and other consulting services for insurers, health plans, and employers. Our consultants are familiar with the laws and regulations in every state, which makes managing regulations more simple. Our services range from benefit development to examination audits and can help ensure compliance.

Our experts offer essential support for businesses' employee benefits including:

• Health plans.
• Retirement plans.
• Workers' compensation programs.
• Additional support.

Our team also designs action plans specifically for employers to comply with HIPAA Title II. Are you ready to take action and ensure complete compliance? Reach out to our team today to begin the process.