Employer-sponsored benefits include health insurance and retirement plans that employers offer their employees for no cost or a modest price. This currently serves as the most common method for Americans to obtain health insurance coverage, with the Kaiser Family Foundation reporting that employer-sponsored insurance covers nearly 155 million Americans.
This means that employers are obligated to ensure they follow the requirements for offering coverage to the letter. For example, under federal law, former employees can remain on the health insurance plan provided by their employer for a set amount of time after leaving their role at their own expense; this is also considered employer-sponsored coverage.
In addition to health insurance, employers may sponsor savings plans such as 401(k) and Roth 401(k) plans to help employees save for retirement while obtaining tax benefits.
Outlined below are some of the requirements for employer-sponsored benefits plans.
They Must Offer a Minimum Amount of Essential Coverage
The Affordable Care Act stipulates that Americans must maintain at least a basic amount of health insurance coverage, with a few exceptions. This is known as minimum essential coverage. Those who fail to comply with this requirement could face tax penalties. Employer-sponsored coverage must meet this minimum.
Under the Affordable Care Act, employers are obligated to offer employees health coverage if they have at least 50 employees working full-time or are considered full-time equivalent. A full-time equivalent equals two or more part-time employees whose work hours, when taken together, equal a full-time load of 30 hours per week.
Although companies that have less than 50 full-time employees or equivalents do not have to provide health coverage, they may be able to obtain tax credits by opting to sponsor coverage for their employees.
Penalties will apply for companies that meet the requirements to sponsor coverage but fail to do so.
Any company that offers employer-sponsored benefits must report their costs on W2 forms. Although these benefits are not taxed, the information must appear on these annual wage statements to provide employees with a clearer picture of the value of their coverage. In addition, employees might receive a Form 1095-B or 1095-C with information about their coverage.
The Employee Retirement Income Security Act (ERISA)
The Employee Retirement Income Security Act (ERISA) sets uniform standards to ensure the fairness of employee benefit plans. It has the authority to verify that workers receive the benefits they have been provided.
It requires those in charge of employer-sponsored benefits plans to manage them in a way that benefits beneficiaries and participants while avoiding conflicts of interest. It also requires them to report information about the plans’ finances and operations to participants and the government.
ERISA also requires employers to use an accurate record-keeping system to attribute and track expenses, distributions, and contributions.
Businesses must also adhere to certain benefits disclosure requirements. For example, they must provide a Summary Plan Descriptions (SPD) to every employee who participates in health benefits or retirement plans that ERISA covers.
This detailed guide on the benefits offered by the program and how it works should explain, among other details, how benefits are paid, how they can be claimed, when an employee’s benefits become vested, and how employees become eligible for participation. New hires should receive an SPD within 90 days of beginning their employment.
Other notice requirements may include certificates of creditable coverage, special enrollment notices, and other notices related to the Health Insurance Portability and Accountability Act of 1996 (HIPAA), Continuation of Health Coverage (COBRA), and other applicable acts depending on the nature of the benefits.
How Company-Sponsored Benefits Benchmarking Can Help
Employers that want a better idea of how their offering aligns with any applicable requirements, as well as the offerings of their competitors, should consider company-sponsored benefits benchmarking. This can help employers make the right changes to attract new employees, retain current talent, and make other moves that protect the company’s best interests.
Company-sponsored benefits benchmarking considers a range of factors, including plan designs, worker’s compensation, total benefits costs, and any voluntary offerings and cost-sharing measures implemented.
The data on benefits can be broken down into categories, such as job titles and geographic locations, and it is a powerful tool for evaluating the company’s return on investment and overall benefits strategy.
Contact Business Benefits Group (BBG) to Learn More About Employer-Sponsored Benefits Benchmarking
Navigating the complex legal requirements associated with employer-sponsored benefits and gauging their effectiveness is a challenging yet vital task for businesses that want to remain competitive. The benchmarking analysis experts at Business Benefits Group (BBG) can help your company make smarter decisions, reduce costs, and stay ahead of the competition. To learn more about our services, contact us today to schedule a consultation.