Employee benefits are one of the most important elements of attracting and retaining top talent, and offering these perks comes with significant responsibilities for employers. Complying with federal, state, and local laws governing benefits is critical to avoiding legal trouble, financial penalties, and reputational damage.
Mosey’s guide provides a comprehensive overview of employee benefits compliance for 2025 and offers actionable steps for employers to meet their obligations.
What Is Employee Benefits Compliance?
Employee benefits compliance refers to ensuring that all benefit plans and practices adhere to applicable laws and regulations. This includes providing legally required benefits, properly administering optional benefits, and maintaining accurate records.
Failing to comply with benefits regulations can result in financial penalties, legal disputes, damaged employee relationships, and loss of trust within your organization. Your employees are relying on you to uphold your end of the arrangement, and the law expects you to fulfill your obligations.
Compliance is not optional, and employers must take proactive steps to ensure their benefit offerings meet all legal requirements.
What Are the Main Areas of Employee Benefits Compliance?
Benefits compliance requirements can differ between states or industries. However, several core areas of employee benefits compliance will apply to most medium to large employers.
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Affordable Care Act (ACA) Compliance
The Affordable Care Act requires organizations with 50 or more full-time employees to offer affordable health insurance (based on employee income) that meets minimum coverage standards described by the law.
Guidelines require employers to track employee hours to determine if they qualify as full-time under ACA guidelines and to submit Form 1094-C and Form 1095-C to the IRS annually.
The Affordable Care Act is set to expire at the end of 2025 and may not be renewed. Consider exploring alternative healthcare options for your employees and review healthcare requirements set in place by state and local laws, which may require you to offer specific types of insurance to your employees. Even if the Affordable Care Act expires, your organization is still subject to state laws.
State-Specific Sick Leave Laws
An increasing number of states are implementing laws requiring employers to offer paid sick leave and job protection benefits to qualifying employees.
Enrollment requirements are different across states and usually consider the number of hours an employee works, the duration of their employment with the company, and the total number of employees an organization employs.
Many sick leave laws are already in effect, while several others have been passed and are awaiting formal implementation. Check the status of your state’s sick leave laws and verify implementation dates to ensure that your organization is currency complying or working toward compliance in preparation for the effective date.
Employee Retirement Income Security Act (ERISA)
ERISA sets standards for retirement plans, pensions, and certain welfare benefit plans. Employers are required to provide plan participants with detailed information, such as Summary Plan Descriptions (SPD) and annual funding notices. Employers are required to adhere to fiduciary responsibilities to act in participants’ best interests and file annual ERISA reports, including Form 5500.
Employers meet compliance requirements by maintaining detailed plan documents and partnering with legal or financial experts to meet fiduciary duties. Automated systems can be helpful to streamline reporting.
State-Specific Retirement Plans
A significant number of Americans do not have sufficient retirement savings. State-mandated retirement plans are designed to compel employers to provide employees with affordable retirement accounts through automatic enrollment with a private insurance company or through a state-managed retirement system. Employees can sometimes opt out of automatic enrollment.
Check state and local laws to determine if your organization is impacted by mandatory retirement plans, and review your compliance options to choose a retirement program that will meet the needs of your employees.
Family and Medical Leave Act (FMLA)
The FMLA mandates that employers with 50 or more employees provide up to 12 weeks of unpaid leave for eligible workers for specific medical or family reasons.
Employers are required to notify employees of their FMLA rights and maintain their health benefits during leave. Employers must reinstate employees to their original or equivalent position after leave.
Employers are required to develop clear FMLA policies and it’s common to include them in their employee handbook, train managers to recognize FMLA-eligible situations, and use FMLA reporting forms to document leave.
It’s important to note that FMLA exists separately from other state and company-specific leave policies. Internal policies cannot replace FMLA.
When an employee requests leave, it’s crucial to specify whether they’re using FMLA time, company policy time, or state-mandated leave time. This can be a significant undertaking for HR to juggle, and you may want to consider how leave policies interact when approving leave time.
Medicare Compliance
Employers must comply with Medicare Secondary Payer rules to coordinate benefits for employees eligible for Medicare. Determine whether your group health plan is primary or secondary to Medicare and ensure Medicare taxes are correctly withheld and reported.
Employers must communicate Medicare enrollment options to employees and train payroll teams on Medicare tax obligations.
Health Savings Accounts (HSAs)
HSAs are tax-advantaged accounts tied to high-deductible health plans (HDHPs). Employers offering HSAs must ensure compliance with IRS rules. Verify that your organization’s plans meet HDHP requirements and monitor annual contribution limits. Contribution limits change annually; be prepared to update contribution caps as necessary.
Flexible Spending Accounts (FSAs)
FSAs allow employees to set aside pre-tax dollars for qualified medical, dependent care, or commuting expenses. It’s necessary to ensure contributions do not exceed IRS limits. Regularly review your plan limits and eligible expenses and communicate FSA policies clearly to employees.
What Are Some Best Practices for Maintaining Compliance?
Compliance is an ongoing process that requires constant monitoring and maintenance. States frequently enact new laws and rules that create significant compliance requirements for employers.
Overseeing compliance and making policy adjustments can be a complicated process. Streamlining compliance simplifies your workload while ensuring you don’t miss important deadlines.
Create an Employee Benefits Compliance Calendar
Track deadlines for reporting, filing, and renewing plans to ensure timely compliance. If compliance requires you to change your current policies or implement new ones, create a step-by-step list of actionable goals that will bring you to compliance by the deadline.
Conduct Regular Audits
Review benefits plans, procedures, and documentation annually to ensure they meet legal requirements. It helps to make preemptive moves when impending changes require your organization to offer new or more comprehensive benefits.
Keep Employee Handbooks Updated
Include clear policies on benefits and compliance in your employee handbook. Regular updates ensure alignment with changing laws. It’s your responsibility to ensure employees are informed of their rights under the law.
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Track Compliance Status
You can track state and local compliance requirements with Mosey and view all relevant requirements on one convenient dashboard. Track relevant laws and policies that impact your organization and assure compliance with just a few clicks.
What Are the Consequences of Non-Compliance With Employee Benefit Rules?
Failing to comply with employee benefits regulations can result in exorbitantly costly financial penalties, lawsuits, and reputational damage. Lawsuits and penalties can sometimes bankrupt smaller organizations, forcing them to close their doors.
Reputational damage makes it difficult for an organization to recruit and maintain top talent and may also sully relationships with customers and clients who no longer trust your brand after your involvement in a public dispute.
What Are Some Future Trends in Employee Benefits Compliance?
Many employers are voluntarily offering more benefits to retain top talent and better support their workforce. In some cases, states are compelling organizations to expand their benefits with a particular focus on paid sick leave and retirement plans.
Increased Focus on Mental Health Benefits
Employers must navigate laws requiring coverage for mental health and substance use disorders. Mental health benefits can work to prevent employee burnout. Stress reduction can lead to greater productivity in the workplace and may be tethered to better physical health.
State-Specific Regulations
States are enacting unique benefits laws, such as paid family leave programs. Employers must stay updated on both federal and state requirements. State and federal requirements exist simultaneously — employers must meet the criteria of both laws to remain compliant.
Technology Integration
More companies are using automation tools and artificial intelligence (AI) to streamline HR and compliance processes and detect errors early. Technology can be a watchful eye that reduces the workload of HR employees while allowing them to complete their duties more efficiently.
Maintain Compliance With Mosey
Employee benefits compliance is an ongoing responsibility that requires careful planning and execution. By understanding the key regulations, implementing best practices, and staying updated on legal changes, employers can offer competitive benefits while avoiding costly penalties.
Mosey’s platform is built to help employers keep track of state and local business compliance requirements by centralizing and streamlining tasks. Schedule a demo with Mosey to learn how we can simplify employee benefits compliance for your organization.
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