When it comes to employee benefits, even a slight compliance misstep can quickly spur a chain of events that results in significant financial and legal challenges. For a small or mid-sized business without a dedicated compliance department, comprehending the intricate web of regulations about benefits administration can be nerve-wracking.
The regulatory outlook constantly evolves, and even the most diligent human resources professionals may be challenged to stay afloat. The various compliance requirements among ERISA, COBRA, ACA, and HIPAA are monumental. Each regulation has reporting deadlines, disclosure requirements, and potential penalties that can harm your reputation and profits.
The Real Cost of Compliance Shortcomings
It is not unusual for business leaders to think about compliance mistakes in terms of financial penalties. This is an understandable concern, as ACA violations sometimes reach $100 per day for each affected employee. However, actual cost extends far beyond immediate financial penalties.
For example, legal expenses associated with addressing compliance violations can quickly escalate into the tens or hundreds of thousands of dollars. These costs include potential settlements, attorneys’ fees, court costs, and implementing corrective measures. For smaller organizations with thin margins, this can seriously jeopardize the business’s future.
Less quantifiable but equally damaging is the impact this can have on employee trust and employer reputation. When benefits administration errors affect employees’ access to healthcare or financial protection, turnover is inevitable. In addition, these incidents can quickly become public in today’s interconnected world. They can compromise your recruitment efforts and customer perception.
Common Compliance Pitfalls
Some compliance issues appear with remarkable consistency across organizations of all sizes. Documentation errors rank among the most prevalent issues, with missing, incomplete, and outdated plan documents often triggering compliance concerns in Department of Labor audits.
Notification failures are another significant vulnerability. From Summary Plan Descriptions to Summary of Benefits and Coverage documents, employers must follow numerous requirements to provide specific information to employees within stringent timeframes. Missing just one of these daily deadlines can result in penalties that add up quickly.
Another area of concern is determining eligibility. With varying classifications of employees, including full-time, part-time, and contingent workers, eligibility tracking requires careful attention to detail. This has grown even more complicated in recent years thanks to the rise of remote work.
The Role of Technology
Digital advancements have made compliance easier in some respects, but they also introduce new risks. Implementing new technology without proper configuration and testing can lead to transitional vulnerabilities during important periods, such as open enrollment. Relying on legacy systems with manual workarounds creates compliance blind spots.
When properly implemented, modern benefits administration platforms can dramatically reduce human error while creating useful audit trails that show good-faith compliance efforts. For example, small and midsized businesses can use scalable cloud-based solutions with enterprise-level compliance capabilities that don’t require enterprise-level investments.
The Strategic Value of Compliance
Organizations must recognize that benefits compliance extends beyond mitigating risks to creating strategic advantages. When compliance processes operate efficiently, HR teams can focus on pursuing strategic initiatives that drive business growth. In addition, well-designed compliance frameworks can help businesses spot opportunities for improving processes and containing costs that might have been overlooked.
When employees receive timely and accurate information about their benefits and enjoy seamless enrollment and claims processes, they will be more satisfied with their total compensation package. This leads to better retention and engagement, which can significantly impact performance.
Creating a Culture of Compliance
Sustainable compliance doesn’t arise automatically from occasional audits or reactive measures; it develops through an organizational culture emphasizing compliance at every level.
Regular compliance assessments can support ongoing improvement, identifying vulnerabilities before they become expensive outright violations. These reviews should examine compliance with specific regulations at the technical level and the effectiveness of underlying processes and communications. The insights gained from these assessments can be used to find targeted improvements to strengthen compliance while enhancing efficiency.
Keep Compliance in Check With Business Benefits Group
Benefits compliance might seem like part of a long list of business obligations. However, effective compliance management also offers an opportunity to reduce business risks and optimize resources. Investing in compliance can deliver returns that well exceed initial expenditures.
Working with benefits compliance professionals allows small and mid-sized businesses to remain focused on growth while establishing compliance and benefiting from outside expertise. At Business Benefits Group, our dedicated benefits consultants specialize in helping small and mid-sized businesses optimize their benefits programs while avoiding potentially costly compliance mistakes.
Our regulatory expertise and implementation experience enable us to design compliance solutions that work in the real world and are customized to your organization. Contact us today to learn more!