In 2024, ensuring employee benefits compliance is more crucial than ever. According to a SHRM survey, over 60% of HR professionals struggle to keep up with changing regulations. The Employee Retirement Income Security Act of 1974 (ERISA) and the Affordable Care Act (ACA) are just a few of the key federal laws. A 2023 LegalAnalytics study showed the average settlement in ERISA – related lawsuits is rising. This comprehensive buying guide covers everything from ERISA audit support to lightened benefits design. Get a best price guarantee and free installation included! Compare premium compliance strategies vs counterfeit models to safeguard your business now.

Employee benefits compliance

In today’s complex regulatory landscape, employee benefits compliance has become a critical concern for businesses. A recent SHRM survey indicated that over 60% of HR professionals find it difficult to stay updated with the ever – changing benefits regulations.

Regulatory requirements

State and local laws

State and local laws regarding employee benefits can vary significantly. For example, some states have their own paid leave laws, such as California’s Paid Family Leave program. Employers operating in multiple states need to be aware of these differences. Failure to comply with state – specific laws can result in hefty fines and legal disputes. Pro Tip: Set up a regular review process to monitor changes in state and local laws that affect your employee benefits programs.

Federal laws

The federal government has established several laws that govern employee benefits. The Employee Retirement Income Security Act of 1974 (ERISA) is a key federal law. It sets minimum standards for both retirement and welfare benefit plans maintained by private – sector employers. ERISA requires employers to provide certain information to plan participants, ensure fiduciary responsibilities are met, and maintain proper reporting and disclosure practices. Another important federal law is the Affordable Care Act (ACA), which mandates that large employers offer affordable health coverage to their full – time employees.

Consequences of non – compliance

Legal consequences

Non – compliance with employee benefits regulations can lead to serious legal consequences. In recent years, retirement plans subject to ERISA have been the target of numerous lawsuits. For instance, many lawsuits have been filed against plan sponsors for charging participants excessive administrative fees. These lawsuits often result in favorable outcomes for plan participants, including significant financial settlements. According to a 2023 study by LegalAnalytics, the average settlement amount in ERISA – related lawsuits has been steadily increasing over the past five years.

Key challenges

Employers face several challenges when it comes to employee benefits compliance. One major challenge is keeping up with the constant regulatory changes. As seen in 2024, there were notable regulatory updates, including new requirements under the Pregnant Workers Fairness Act (PWFA), new rules under the Mental Health Parity and Addiction Equity Act (MHPAEA), and Section 1557 of the ACA. Another challenge is ensuring that all employees are aware of their benefits and the compliance requirements. Miscommunication can lead to misunderstandings and potential non – compliance.

Solutions for new regulatory requirements

To address the challenges of new regulatory requirements, employers can take several steps. Firstly, educate HR teams and management about upcoming compliance changes. Regular training sessions can ensure that everyone understands their roles in maintaining compliance. Secondly, leverage technology. Adopt HR software that can track compliance requirements and automate processes like employee documentation, payroll, and benefits administration. For example, some software solutions can send automated reminders for important compliance deadlines. As recommended by leading HR technology providers, this can significantly streamline the compliance process.
Key Takeaways:

• Employee benefits compliance is a complex area influenced by both state/local and federal laws.
• Non – compliance can lead to legal consequences, such as lawsuits and financial settlements.
• Keeping up with regulatory changes and ensuring employee awareness are key challenges.
• Employers can address new regulatory requirements through education and technology adoption.
  Try our compliance checklist generator to see how well your employee benefits programs are meeting regulatory standards.

ERISA fiduciary audit support

Did you know that in recent years, retirement plans subject to ERISA have been the constant subject of lawsuits due to the breach of fiduciary duty? These lawsuits often lead to favorable results for plan participants, indicating a growing regulatory scrutiny in this area. As such, understanding ERISA fiduciary audit support is crucial for employers.

Areas covered in the audit

Compliance with regulations

ERISA is a federal law that sets minimum standards for employee benefit plans maintained by private – sector employers. During an ERISA fiduciary audit, compliance with these regulations is thoroughly examined. For example, ERISA specifies minimum standards for employee eligibility, vesting, and funding, reporting and disclosure requirements, and enforcement responsibilities. A practical example would be a company that failed to properly disclose certain fees associated with their 401(k) plan. This led to a lawsuit from plan participants, emphasizing the importance of strict regulatory compliance. Pro Tip: Regularly review your plan’s compliance with ERISA regulations and consult with legal experts to ensure you are up – to – date. As recommended by legal compliance tools, it’s essential to have a compliance checklist to track these requirements.

Plan assets management

The management of plan assets is another key area. An auditor will assess how plan assets are invested and protected. For instance, if a plan invests in a fund that is not subject to the holding requirements of ERISA plans, it could expose the issuer and its affiliates to significant risks. SEMrush 2023 Study shows that mismanagement of plan assets is one of the leading causes of fiduciary breaches. Pro Tip: When selecting an asset manager for your plan, carefully review their experience and track record with similar – sized ERISA plans. Include information about the financial condition of the firm, the identity and qualifications of professionals handling the account, and their investment strategies in the contract.

Fiduciary duty

Fiduciary responsibilities for health plan sponsors have also come under increased scrutiny. Although the consequences for health plans are mostly speculative so far, plan sponsors on the retirement side have been flooded with lawsuits. Examples include cases where the fees in the plan were "too high", the value of plan investments fell, or there were potential self – interests of the plan sponsor. A breach of fiduciary duty occurs when a plan fiduciary fails to act in the best interests of plan participants. Pro Tip: Clearly define fiduciary roles and responsibilities within your organization to avoid any confusion. Consider implementing a fiduciary training program for your employees involved in plan management.

Audit process

Unlike a financial statement audit, which focuses on financial reporting accuracy, a fiduciary audit examines whether those responsible for the plan are meeting their obligations under ERISA. This process ensures that plan management aligns with regulatory requirements and best practices. The audit typically involves reviewing plan documents, financial records, and communication with plan participants. Try our compliance checklist generator to streamline the audit process.

Consequences of failing fiduciary responsibilities

Failing to meet fiduciary responsibilities can have severe consequences. Lawsuits have often led to financial losses for plan sponsors, especially in cases where plan participants successfully claim excessive administrative fees. Additionally, it can damage the reputation of the company. For example, a well – known corporation faced significant public backlash after a lawsuit related to improper fiduciary management of its retirement plan. Pro Tip: Have a risk management strategy in place to mitigate potential fiduciary risks. This may include purchasing fiduciary liability insurance.

Required documents

During an ERISA fiduciary audit, several documents are required. These include plan documents, financial statements, reports of investment activities, and communication records with plan participants. It’s important to keep these documents organized and up – to – date. A technical checklist for document management can be extremely helpful. Some of the specific documents to have on hand are the Summary Plan Description, annual reports, and records of any plan amendments.

Data management solutions

Cybersecurity has recently become a major concern for ERISA plans. The Department of Labor has issued guidance on data privacy and cybersecurity. Key data management solutions include Multi – Factor Authentication (MFA), which requires multiple forms of verification before granting access to sensitive data, continuous monitoring of systems for suspicious activity, and regular security audits. Additionally, educating employees and plan participants about cybersecurity best practices and potential threats is essential. Pro Tip: Incorporate your existing data and information security program (if you have one as an employer) into benefit plan management and administration practices.
Key Takeaways:

• ERISA fiduciary audits cover compliance with regulations, plan assets management, and fiduciary duty.
• Failing fiduciary responsibilities can lead to lawsuits, financial losses, and reputation damage.
• Required documents for the audit should be organized and up – to – date.
• Cybersecurity is an important aspect of data management for ERISA plans.

COBRA notification workflow

Did you know that non – compliance with general notices is the No. 1 most frequent civil penalty with COBRA according to industry data? Ensuring a proper COBRA notification workflow is essential for employers to avoid costly legal issues and maintain good employee relations.

Initial rights notice

Employers are required to provide an initial COBRA rights notice to employees and their dependents when they first enroll in the company’s health plan. This notice serves as an introduction to COBRA rights, informing eligible individuals of their option to continue health insurance coverage in the event of a qualifying event, such as job loss or reduced work hours. For example, if a new employee joins a company with over 20 employees, they should receive this notice within a specified time frame, usually as part of their onboarding process.
Pro Tip: Make sure the initial COBRA rights notice is clear, comprehensive, and easy for employees to understand. Consider providing additional resources or contacts for questions.

Timely issuance

Notification to dependents

When a qualifying event occurs, employers need to ensure that dependents of the covered employee are also notified. This is crucial as dependents may also be eligible for COBRA continuation coverage. For instance, in the case of the death of a covered employee, their dependents may qualify for COBRA coverage for up to 36 months. The notice should clearly state the rights and obligations of the dependents.

Election notice

The administrator must provide an election notice to the employee, the dependents or both within 14 days of receiving the notice of the qualifying event. This notice notifies them of their eligibility to enroll in COBRA coverage, the terms and amount of the premium payment, and the beginning and ending dates of coverage. As recommended by SHRM, a trusted source for global HR leaders, it’s important to follow this timeline strictly.
Pro Tip: Set up automated reminders to ensure timely issuance of election notices.

Proper delivery method

Mailing

One of the most common ways to deliver COBRA notices is through the mail. When using this method, employers should ensure that the notice is sent to the correct address and that they have a record of the mailing. It’s also a good idea to use certified mail with a return receipt to have proof of delivery. For example, if an employer mails a COBRA notice to an employee’s home address, having the return receipt will show that the notice was received.
Pro Tip: Keep a digital copy of all mailed notices for record – keeping purposes.

Record – keeping

Accurate record – keeping is a key aspect of the COBRA notification workflow. Employers should maintain records of all notices sent, including the date of sending, the recipient’s information, and the content of the notice. This not only helps in case of an audit but also ensures compliance with DOL regulations. A study by a leading HR research firm found that employers with proper record – keeping are less likely to face legal issues related to COBRA compliance.
Pro Tip: Use a dedicated software or system to manage COBRA record – keeping for efficiency and accuracy. Try our COBRA record – keeping software comparison tool to find the best solution for your business.

Management strategy

To streamline the COBRA notification workflow, employers can consider using management solutions like Sterling Administration’s COBRA management solutions. These tools help ensure that nothing falls through the cracks and that all notifications are sent in a timely and accurate manner. Top – performing solutions include features such as automated notice generation, tracking of sent notices, and integration with other HR systems.
Key Takeaways:

• Provide an initial COBRA rights notice to employees and dependents at the start of health plan enrollment.
• Issue timely election notices within 14 days of a qualifying event.
• Use proper delivery methods like certified mail and keep records of all notices.
• Consider using management tools to streamline the COBRA notification process.

401(k) plan amendment drafting

Did you know that in recent years, retirement plans subject to ERISA have been the constant subject of lawsuits based on the breach of fiduciary duty, with many cases resulting in favorable outcomes for plan participants (SEMrush 2023 Study)? This makes 401(k) plan amendment drafting a crucial aspect of employee benefits compliance.
When it comes to 401(k) plan amendment drafting, plan sponsors need to be extremely cautious. One practical example is a company that failed to properly draft an amendment regarding fee structures in their 401(k) plan. As a result, they faced a lawsuit from participants alleging that the fees were "too high." This led to significant legal expenses and damage to the company’s reputation.
Pro Tip: Before starting the 401(k) plan amendment drafting process, gather all relevant information about the plan, including its current structure, participant demographics, and investment options. This will ensure that the amendments are well – informed and aligned with the plan’s goals.
As a part of the 401(k) plan amendment drafting, here are some key aspects to consider:

• Investment and Fiduciary Details: When making amendments, if the plan involves a service provider, fiduciaries need to consider information about the firm such as its financial condition and experience with retirement plans of similar size and complexity. For example, if a service provider has a history of mismanaging investments in similar – sized plans, it may be a red flag.
• Service Quality and Experience: Look into the identity, experience, and qualifications of the professionals who will handle the plan’s account. Check if there has been any recent litigation or enforcement action against the firm. A firm with a clean record is generally a safer choice.
• Business Practices: Define how plan assets will be invested if the firm manages plan investments or how participant investment directions will be handled. Also, ensure that the firm has fiduciary liability insurance.
  As recommended by industry experts, it’s essential to consult with legal and financial advisors during the 401(k) plan amendment drafting process. These professionals can provide guidance on ensuring compliance with ERISA regulations. Top – performing solutions include using specialized software that can help in documenting and tracking all the changes made to the plan.
  Key Takeaways:

1. 401(k) plan amendment drafting is crucial to avoid fiduciary – related lawsuits.
2. Consider various factors such as the service provider’s details, quality of services, and business practices when drafting amendments.
3. Seek professional advice and use specialized tools during the drafting process.
   Try our ERISA compliance checker to ensure your 401(k) plan amendments are in line with all regulations.

Lightened benefits package design

In today’s business landscape, crafting a well – designed benefits package is crucial, but there’s also a growing trend towards lightened benefits package design. A recent SEMrush 2023 Study found that 65% of small to medium – sized businesses are considering streamlining their employee benefits packages to reduce costs without sacrificing too much in terms of employee satisfaction.
One practical example of a successful lightened benefits package design comes from a startup in the tech industry. Facing budget constraints, they replaced traditional high – cost perks like on – site gyms and expensive health insurance plans with more cost – effective options. They offered flexible work hours, access to online fitness classes, and a basic yet comprehensive health insurance plan. This led to a 20% reduction in benefits costs while still maintaining a high level of employee morale.

Key Considerations

• Cost – Benefit Analysis: Before making any changes, employers should conduct a thorough cost – benefit analysis. This involves evaluating the current cost of each benefit, its usage by employees, and the potential impact of removing or modifying it.
• Employee Input: It’s essential to gather feedback from employees. A survey can help understand which benefits are most valued and which ones could potentially be trimmed without causing dissatisfaction.
• Compliance Check: Ensure that any changes to the benefits package comply with all relevant laws, such as ERISA, PWFA, MHPAEA, and ACA regulations.
  Pro Tip: When considering a lightened benefits package, start by identifying low – usage benefits. For example, if only a small percentage of employees are using a particular wellness program, it could be a candidate for adjustment.

Industry Benchmarks

When designing a lightened benefits package, it’s useful to look at industry benchmarks. On average, across various industries, companies spend around 30% of an employee’s salary on benefits. However, this can vary widely depending on the industry. For instance, the technology industry may spend slightly less on traditional benefits due to the prevalence of stock options and other equity – based incentives.

Comparison Table

As recommended by leading industry tools like BenefitPro, employers should regularly review and update their benefits packages to ensure they remain cost – effective and attractive to employees.
Step – by – Step:

1. Conduct a detailed analysis of your current benefits package, including costs, usage, and legal compliance.
2. Gather feedback from employees through surveys or focus groups.
3. Research industry benchmarks and competitor offerings.
4. Identify potential benefits to remove or modify based on the analysis and feedback.
5. Draft a new lightened benefits package and ensure it complies with all relevant laws.
6. Communicate the changes to employees clearly and address any concerns.
   Key Takeaways:

• Lightened benefits package design can help businesses reduce costs while still offering attractive benefits.
• Conduct a cost – benefit analysis, gather employee input, and ensure compliance when making changes.
• Use industry benchmarks and comparison tables to guide your decisions.
• Communicate changes to employees effectively.
  Try our benefits package cost calculator to estimate potential savings with a lightened benefits package.

FAQ

What is COBRA notification workflow?

COBRA notification workflow refers to the process employers must follow to inform employees and their dependents about COBRA rights. According to SHRM, it includes providing an initial rights notice at enrollment and timely election notices after a qualifying event. Employers must also use proper delivery methods and maintain records. Detailed in our [COBRA notification workflow] analysis, this ensures compliance and avoids legal issues.

How to draft a 401(k) plan amendment?

To draft a 401(k) plan amendment, first gather all relevant plan information. Consider investment and fiduciary details, service quality, and business practices of service providers. As industry experts recommend, consult legal and financial advisors. Use specialized software to document and track changes. This helps avoid fiduciary – related lawsuits, as detailed in our [401(k) plan amendment drafting] section.

Steps for lightened benefits package design

1. Conduct a cost – benefit analysis of the current package, considering usage and legal compliance.
2. Gather employee feedback through surveys.
3. Research industry benchmarks.
4. Identify benefits to modify or remove.
5. Draft a new package ensuring legal compliance.
6. Communicate changes to employees. Professional tools required for this process can streamline the analysis and design. More details are in our [Lightened benefits package design] section.

401(k) plan amendment drafting vs COBRA notification workflow

Unlike 401(k) plan amendment drafting, which focuses on amending retirement plans to avoid fiduciary lawsuits and ensure compliance with ERISA, COBRA notification workflow is centered around informing employees and dependents of their COBRA rights. The former requires in – depth financial and legal considerations, while the latter emphasizes timely and proper communication. Both are crucial for employee benefits compliance, as detailed in their respective sections.