How Often Should I Review My Company’s Employee Benefits Plan?

With each passing year, every business should examine its employee benefit plans. This includes retirement plans, health insurance, and other types of benefits. But business owners are busy.  Keeping up with benefits law isn’t at the top of the list for most business owners.

Outdated benefit plans could mean your business loses top talent or is as seen as out of step with industry standards. Lack of compliance with employee benefit plan can also result in civil liability, financial penalties, or criminal charges. To understand the importance of an annual review for your benefit plan, talk to a labor and employment law attorney.

Understanding Employee Benefits

The Affordable Care Act (ACA) requires employers with 50 or more employees to provide health insurance, but there is no requirement for employers to provide other benefit offerings under federal law. Other benefits include retirement savings, childcare, or disability insurance.

Most states don’t require small businesses to provide workplace benefits or perks. But many employers do, since providing good benefits can help with recruitment and retention of top talent in competitive markets.

In addition to standard financial benefits, many workers appreciate work-life balance and the importance of employee satisfaction through employer offerings such as:

• Flexible work schedule
• Additional paid time off (PTO) or vacation time
• Wellness programs
• Mental health coverage

Federal Laws Governing Employee Benefits

The Employee Retirement Income Security Act of 1974 (ERISA) is the federal law regulating most employer benefit plans. ERISA applies to most employer-provided pension plans, health insurance, and disability insurance.

ERISA does not require employers to offer different benefit plans. However, if employers do offer employee benefit plans, they must follow ERISA regulations. Under ERISA, employers must provide information about benefits and compensation packages, enrollment and vesting, funding, and employee rights under the plan.

Plan administrators have a fiduciary duty to beneficiaries. Administrators must act in the best interests of plan beneficiaries. This includes regular plan performance monitoring, disclosures, and record-keeping.

Recent Changes to Employment Laws

There are a lot of documents that the government requires from companies on an annual basis. Employers and HR teams should contact legal counsel to review and update policies to comply with current regulations and best practices.

Employment and labor laws change all the time. Here are some examples of issues business owners should check to update their employee benefits packages. Employment law issues to review include:

• Independent contractor classification
• IRS updated contribution limits
• Cybersecurity updates
• SECURE 2.0 Act updates for retirement savings plans
• Student loan payment matching
• Long-term part-time employee inclusion in 401k plans
• Changes to Flexible Spending Accounts (FSAs) and Health Savings Accounts (HSAs)

Status of Independent Contractors

“The Affordable Care Act (ACA) has been a huge change in making employers look at their employee base for health care,” says Malaika Caldwell, an employment benefits attorney in Illinois. “For decades, many employers listed many employees as independent contractors, so they weren’t eligible for benefits. The ACA qualified many of those people as [full-time] employees rather than independent contractors, meaning they had to be offered benefits.”

Changes to the IRS Determination Letter Program

Through the Internal Revenue Service (IRS), the federal government had a determination letter program for decades. Companies with a benefits program could simply contact the IRS and get a favorable determination on 401(k) retirement plans.

“This acted as a sort of blessing from the IRS that your plan complies with federal law,” says Caldwell. “The IRS did away with that plan in early 2017, and the program was cut down to the bare bones.” In its 2019-2020 Revenue Procedure, the IRS opened the determination letter program for hybrid and merged plans.

“In analyzing a company’s plan, [a lawyer] can ensure they are annually up to par in compliance… Reviewing each year is best practice,” adds Caldwell.

Mental Health Parity Act

According to Caldwell, the Mental Health Parity and Addiction Equity Act (MHPAEA) requires that companies that offer mental health and therapy benefits must make them comparable to their other medical benefits. Failure to do so means there is a high likelihood of being out of compliance. 

Find an Experienced Employment Law Attorney

With these considerations, business owners often must rewrite entire health insurance policies. Employers must also communicate these changes to their employees. It is best practice to have your benefits plan reviewed annually to ensure compliance and employee well-being.

For efficient and effective compliance, visit the Super Lawyers directory to find an experienced employee benefits attorney in your area. An attorney can also answer your questions about insurance plan health coverage.

For more information about this area, see our overview of labor and employment law.