Benefits Compliance Can Be Tricky - Here's Why
The business world trends, processes, and policies are vast and always changing and evolving over the years. With the recent technological and social advancements, anyone with an idea can easily start their own small business online to bring it to life. If they’re lucky, it could turn into something big, and they can start expanding and hire people to help achieve their vision. For employees to feel secure in their job whether financially or physically, employers must offer them certain benefits, especially ones that are imposed by the authorities to protect the working class. Employers have to adhere to these regulations or suffer legal consequences. Benefits compliance can be tricky for new business owners and here’s why.
What is Benefits Compliance
The term ‘compliance’ in business refers to a company’s ability to meet legal obligations regarding its employees. It mainly aims to preserve the health and safety of others and includes things like needing to get a license for the business and paying taxes. Its main concern is the responsibility of the employer towards their employees regarding their benefits, payroll, hiring and firing, and protecting them from workplace discrimination and harassment. It extends further to include meeting regulations related to your business like how a restaurant has to meet health department guidelines.
Why It’s Important
Compliance is essential for the benefit of both the employer and employees. The most important benefit for the employer would be the reduced legal risks that include lawsuits, fines, or complete shutdown of business operations. According to the compliance experts from Zenefits, benefits compliance software will make it easier to track your legal obligations and comply with them. As for employees, it ensures their physical and financial safety and protects their legal rights. It also increases employees’ productivity which proves that when compliance is fully met, it’s a win-win situation.
Why it Can Be Tricky
When it comes to a company’s benefits compliance, there must be records and documents that clearly state how everything is being handled. This is not only for the benefit of the management to stay on top of everything, it’s also for when the Department of Labor Audits comes knocking. DOL audits usually require the benefits plan document and any amendments to it, a summary of benefits and coverage (SBC), a summary plan description (SPD), and Form 5500 and a summary annual report (SAR), when relevant. If there is non-compliance in the plan or the way it’s stated, the business can receive thousands of dollars worth of penalties.
Achieving Minimum Coverage
It is very tricky for employers to be able to get their employees coverage that is both affordable and meets the minimum requirements legally required. Not being able to abide by the employer shared responsibility provisions could result in getting the 4980H(a) penalty which is a monthly penalty equal to the number of full-time employees minus 30 and times 1/12 of the annual 4980H(a) penalty for that specific month. If the coverage doesn’t meet the minimum requirement or a full-time employee obtains a subsidy, the 4980H(b) penalty will be enforced; consisting of 1/12 of the annual penalty for that specific month.
Reporting Health Plans
All applicable large employers (ALEs) are required to have a comprehensive health plan. They are also required to report back to the IRS with any health care coverage or healthcare information in general for employees who work full-time and any members of their immediate family. The employer’s data, filled on a ‘form 1095-C’, must be sent at the end of each year. On the other hand, health insurance issuers are also required to report changes in health coverage enrollment or any other information.
Staying Updated on Government Mandates
Rules and regulations regarding benefits and perks are always changing and are amended or updated every now and then. Employers have the responsibility to be aware of any updates to make the necessary amendments to their plans to meet these changes. Otherwise, things will keep changing without the business owner’s knowledge and cause them to have an outdated and inefficient benefits compliance plan. It would not only bring about legal problems and penalties to the business, but it would also be unfair to the employees.
There you have it, this is why benefits compliance can get quite tricky sometimes. Knowing what complicates it and learning more about it can help you understand it better. This will in turn help you conquer compliance for your own business. All you have to do is stay on top of things whether it’s documentation or updates regarding any change in regulations and you’ll be on the safe side. All these efforts will be worth it, knowing that your business is fully compliant and without risk of being penalized or shut-down.