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3 Common but Costly Compliance Mistakes

Common but Costly Compliance Mistakes
When the compliance police come knocking

According to a recent interview with a leading Pennsylvania payroll company, there was a 300% increase in small business compliance audits in 2016. And the trend is likely to continue this year. While there are plenty of regulations to consider, we wanted to focus on the ones that are broken the most often. Take a look below to review our list of the 3 most common but costly compliance mistakes.

No ERISA Plan Documents

This one is big! And by far the most common error. In fact, if you only choose a single compliance rule to follow, make it this one. But explaining it can be a little dry, so try and stick with me. The Employee Retirement Income Security Act (ERISA) requires that all company health plans have two items:

  1. Written Plan Document – Describes how the plan is maintained and who is responsible for it.
    • Many employers believe their plan booklet and policy satisfy this requirement. However, per HR lawyers, they do not.
  2. Summary Plan Description – Provides employees with a precise and complete summary of the plan.
    • Failure to provide this document can result in a $110/day per employee fine.

These will both be crucial if you are selected for an ERISA audit. But don’t panic, there’s a simple solution called a WRAP document. Instead of replacing your current plan certificates, it “wraps” around them. Hence allowing the policy to govern the benefits, while it provides the extra information necessary to comply with ERISA. Contact us for details on how we can help build a custom WRAP Document for your business. And for more info on ERISA document compliance check out this great article from SHRM.

Skipping COBRA

Following the COBRA rules is really quite easy. In a nutshell, whenever someone loses coverage under your health plan, you must send them a COBRA notice. The government even provides sample letters, which you can download and use for free. Yet many small businesses in Central PA simply ignore these requirements. But lately, more and more of them are getting caught. Today the majority of people, or at least their lawyers, are well aware of the COBRA laws. And, as a result, they expect to receive a COBRA offer letter. So be smart and make COBRA part of your regular routine. It won’t take long and it can save you some major headaches. For more details, check out our updated COBRA guide.

Premium or Plan Bias

This is one we see all the time in and around Central PA. Most often when a company is trying to nab a talented worker from a competitor. In order to entice the skilled recruit, they’ll offer to pay 100% of their health care costs. This is fine, but only if the employer does the same for their other workers. The idea is to treat all employees equally, from a benefits’ perspective. Don’t get me wrong, this isn’t always easy. And the new age banded rates make it even harder. But here are some best practices and tips to keep you in compliance:

  • You can pay the same percentage of the premium for all employees. Although the dollar amounts may be different, due to the age banded prices, it is still fair because the percentages are the same.
  • Deducting the same dollar amount from each worker’s check for benefits is also okay. If they have dependents on the plan, then you can charge a higher amount to cover the added expense.
  • When you offer two plans, offer them both to everyone. Offering a special plan to only select employees can be seen as discriminatory. If one plan costs more than the other, simply have the employees pay the difference.
In conclusion…

With the recent uptick in compliance audits for PA small businesses, now’s the time to review and update your policies. While some of the rules can be a real pain, it’s still best to comply with them. Or else you may end up owing Uncle Sam some serious fines. The good news is that your health insurance broker can handle all of these things for you. If they’re not though, maybe it’s time for a change. We’ll be adding more “common but costly compliance mistakes” blog posts in the near future, so stay tuned!

3 thoughts on “3 Common but Costly Compliance Mistakes”

  1. Hi, My name is Stephen Gross and I have been an Independent Insurance Broker for over 41 years.

    At age 75, I have decided to go back in small group marketplace. I offer my clients at no cost to the company or it’s employees the most cost effective, comprehensive benefit program. As one of the services we provide is “Free Cobra Administration” and I was looking for an official survey that confirms that most employers have a problem that they might even be aware of.

    I just wanted to say hello and thank you as I think you blog is right on.

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