Making changes to employee benefit plans in the middle of the year is not ideal, but sometimes it cannot be avoided. After spending months planning your annual benefits enrollment, unexpected disruptions can be very frustrating. Whether the cause is an unexpected rise in costs, a shift in the business’s priorities, or regulatory updates, it is essential to carry out these adjustments in a way that does not compromise the budget or employee satisfaction.
Working with experienced employee benefits consulting firms can help maneuver these challenges strategically by offering customized solutions, establishing compliance, and maintaining clear communication with employees.
Why Are Midyear Changes Needed?
Numerous factors can spur the need for a midyear benefit plan modification. One major cause is mergers and acquisitions, which often require the newly combined workforces to align their benefits offerings. In other cases, a carrier might withdraw from a market or be at risk of financial instability. State or federal legislation could also prompt an overhaul to remain compliant.
Another significant cause is cost pressures. If renewal projections come in substantially over budget, leadership might opt to restructure plans or adjust employee contributions to contend with the financial impact instead of simply absorbing the costs.
Legal and Compliance Considerations
Making these midyear changes isn’t as simple as sending an email announcement. Plan sponsors have to carefully consider complicated regulations, starting with ERISA requirements for plan amendments and Summary Plan Description updates. The timing is very important because employees need to be given sufficient notice before any changes take effect.
Qualifying events under Section 125 cafeteria plans determine when employees can modify their choices outside of open enrollment. In general, plan sponsors can only make midyear changes that align with specific qualifying events. However, there are exceptions for significant cost increases and coverage changes. Working with experienced employee benefits consulting firms can help a business establish that proposed modifications comply with these regulations while keeping legal exposure to a minimum.
Non-discrimination testing can add further complexity to the situation. Changes that affect highly compensated employees differently from other staff members could even create compliance issues that did not exist in the original plan design.
Communication Strategy Makes All the Difference
The success of any midyear change is heavily influenced by the way it is communicated. Employees who feel caught off guard by unexpected modifications may become disengaged with their work or distrustful of their employer, even when the changes are relatively minor. Transparency is essential in these situations.
It can be helpful to begin by acknowledging that midyear changes are disruptive and clearly explaining why they were needed. It is easier to accept unpleasant news when employees understand the reasoning behind it, especially in cases where the alternative would be worse. If cost pressures are driving the change, consider sharing relevant context about healthcare trends and the organization’s efforts to reduce the impact on employees.
Instead of making a single announcement, use multiple communication channels. Initial notifications should be followed up by FAQs, opportunities for one-on-one consultation, and virtual or in-person meetings. Overwhelmed benefits administrators can seek support from experienced benefits consultants.
The timing of these communications is also important. Give employees plenty of notice so they can adjust their personal budgets as needed and make more informed decisions.
Operational Implementation Challenges
These midyear changes tend to generate considerable administrative work, from updating payroll systems to reflect changing contribution amounts or deduction schedules to testing carrier connections and reconfiguring enrollment patterns.
HR teams need to prepare for a rise in support requests during the transitional period. They should expect questions from their employees about how the changes affect their specific situations and be prepared to provide accurate answers.
It is important to document the entire process carefully, keeping clear records of how decisions were made, compliance reviews, the content and timing of communications about the changes, and employee acknowledgement. The audit trail this forms could save the business should questions or complaints arise in the future.
Documentation becomes especially important during midyear changes. Maintain clear records of the decision-making process, compliance reviews, communications sent, and employee acknowledgments. This creates an audit trail that protects the organization if questions come up later.
Looking Beyond the Immediate Change
Any time midyear adjustments are needed, the focus will naturally be on managing the immediate transition. However, it is smart to look at this as an opportunity to evaluate the overall benefits strategy. After all, the need for midyear changes could expose vulnerabilities in the current plan design that could continue to create issues moving forward.
Could this change point to a need for a more thorough benefits review during the next planning cycle? Working with consultants who can take a long-term view can turn this stressful and challenging situation into an opportunity for strategic improvement.
Getting Professional Support
Midyear benefit plan changes can be daunting due to tight timelines, regulatory complexities, and challenges in employee relations. At Business Benefits Group (BBG), our benefits consultants have guided hundreds of companies through successful midyear transitions, assisting with everything from compliance reviews to employee communications. Contact us today to learn more about our employee benefits consulting services.