It’s common that employers aren’t sure whether their benefit plans are complying with all the applicable laws.
“It’s not necessarily the plan design, deductible or what’s covered that’s the issue,” says Cheryl Cooper Perez, president of Benefit Innovations Group.
“Rather, companies tend to fall out of compliance with the Affordable Care Act’s required compliance benefit notices and summary plan descriptions, all of which are documents the Department of Labor mandates and employers must deliver to employees.”
There are various notices employers are required to provide to employees on an annual basis, some at specific times, such as when a new hire is brought on board, or if there are changes to a plan design or an employer’s contribution to the plan. Missing any one of them can result in significant fines.
Smart Business spoke with Perez about managing benefit compliance to avoid costly penalties.
What tends to spur an investigation into a company’s benefits plan?
There are various triggers that will compel the U.S. Department of Labor (DOL), or in some cases the IRS, to audit a company’s benefits. It can be a random audit, in which case the company will be notified by letter of the coming audit and given a list of what the agency wants to review.
Or, as is likely to be the case with an IRS investigation, something suspicious in a financial audit could open the door to a DOL investigation. An employee can also trigger an audit if he or she contacts the DOL because of some wrongdoing.
These agencies’ appetite for investigation has increased since the launch of the Affordable Care Act (ACA). Violations come with very steep fines that accumulate daily.
What are the consequences of having a benefits plan that is found to be out of compliance?
There are several consequences that range from a company having its cafeteria plan revoked to facing hefty fines and penalties. Often, companies are fined, and in most cases those fines are on a per-person, per-instance basis, which can quickly add up.
For example, an employer that’s not providing summary plan descriptions to all employees can be fined $110 per day per participant for each violation. A company with just 20 employees can quickly face fines of $50,000 or more for not distributing those descriptions. That can really impact small and midsize businesses significantly.
It takes a great deal of time, organizational energy and in many cases, substantial legal fees to overcome the consequences of a violation. Dealing with a DOL audit in some cases means shifting resources to deal with it. That can derail the focus of an employer that would otherwise be given to growing the business.
How can companies ensure their plans are in compliance?
Compliance can be a time-consuming and cumbersome process. Many business owners are not experts on this aspect of the law and might not be aware of what’s required of their business. It’s better to rely on a third-party professional that’s knowledgeable about this area of compliance to ensure the company is following the law.
Partner with an organization that specializes in ACA compliance and can manage it on behalf of the company. That gives a company the assurance that the required summaries and notices are being delivered and the company is in compliance with the law.
There are companies that specialize in HR benefits compliance and have the tools needed to ensure companies meet the law’s requirements. This can be done affordably, both in terms of the cost and the time that would otherwise be spent understanding the law and its requirements.
The overall goal is for the company to focus on more important things, knowing that this aspect of its business is handled.
Employers are obligated to comply with the existing law, whether they’re aware of all of its requirements or not. That’s why working with an expert is often the best way to ensure the compliance piece of the business is handled. ●
Insights HR & Consulting is brought to you by Benefit Innovations Group