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Disclaimer: PrimePay does not provide legal or tax advice and the information herein has been prepared for general informational purposes only. The material may not constitute the most up-to date information and is not intended to cover the full spectrum of federal or state laws to which a company may be subject. It is not intended to act as a full compliance check for such purposes. We encourage you to consult with legal counsel or your tax professional if you have questions or concerns regarding your compliance obligations under federal or state law.
Welcome to the PrimePay FREE compliance check.
PrimePay is a compliance-focused Company and our goal is to help you maintain and manage federal and state compliance.
We are here to help inform and educate you on these Federal and State requirements. We will not send or share these answers with anyone.
Offering Premium Only Plans (POPs) is a win-win for businesses and employees. They allow employees to save money on taxes by paying for employee benefits like health insurance with pre-tax dollars, reducing the overall cost for them. Businesses can also benefit, as POPs can be cost-neutral or even generate savings.
However, it's crucial to ensure compliance with federal regulations. POPs require employers to maintain specific documents, including an updated plan document and a summary plan description. Additionally, annual nondiscrimination testing is mandatory.
Key Regulatory Requirements
It’s important to make sure you have a current plan year date on your Premium Only Plan Document (POP).
A Premium Only Plan (POP) document is a crucial component for employers offering pre-tax benefit contributions. The Plan Document is a formal agreement that sets the ground rules; it ensures compliance, protects the employer from legal issues, and provides clarity for employees regarding their pre-tax benefit options and tax benefits.
Employee eligibility requirements and the insurance premiums that the plan allows withheld on a pre-tax basis are key components required to be in your Premium Only Plan Document.
A POP Summary Plan Description (SPD) is a document that provides a simplified explanation of the key features and requirements of your employer's Premium Only Plan Document (POP). The SPD is a user-friendly version of the formal Premium Only Plan document that is written in plain language for employees to easily understand their benefits options.
Mandatory Employee Awareness: The Employee Retirement Income Security Act (ERISA) mandates that employers offering health plans under a Section 125 POP must provide an SPD to all eligible employees within 90 days of their initial coverage date. Ways you can distribute include, first-class mail, email, and intranet.
Here's the reason: The IRS established these tests to ensure POPs benefit all employees fairly, not just highly compensated individuals or key personnel. This annual test verifies that your POP doesn't favor these groups when it comes to pre-tax contributions for benefits like health insurance.
This protects the integrity of the program and ensures all eligible employees receive the intended tax advantages from POP participation.
Since you answered no or don't know on any or all of the above,
you are NOT likely in compliance.
Here’s why it’s important!
The consequences of not having a compliant POP document or performing the required annual Nondiscrimination Testing fall mainly on the employer, but can also impact employees.
For Employers:
For Employees:
What is it and Why it’s important!
State continuation of coverage refers to laws in many U.S. states that allow certain employees to temporarily extend their employer-sponsored health insurance even after they lose eligibility under the normal plan. It bridges a gap in health coverage during a transition period. Not all, but many states require it. State continuation coverage is a patchwork system with significant variations depending on your location.
Compliance & Avoiding Penalties: Employers have a legal obligation to inform employees about their continuation coverage rights within specific timeframes. Having this information readily available helps ensure compliance with state and federal regulations, avoiding potential penalties for non-compliance.
Compliance and Avoiding Penalties: Each state has specific deadlines and notification formats for informing employees about continuation coverage options. Failing to comply with these regulations can lead to penalties for the employer. Staying informed about these requirements helps avoid legal and financial issues.
Failing to comply with state continuation coverage rules can lead to significant financial penalties for your business. These penalties can vary by state and can be imposed per employee or family. On top of that, employees who are wrongly denied coverage may sue, leading to expensive legal battles and medical claims payments.
The key to avoiding these risks is ensuring compliance with both federal and state regulations.
Here's why compliance is smart business:
Remember: There's no one-size-fits-all approach. Penalties and requirements can differ significantly by location.
Taking Action:
By taking these steps, you can ensure compliance and avoid the hassle and expense of non-compliance.
COBRA (Consolidated Omnibus Budget Reconciliation Act) is a lifesaver if you lose your job or experience other qualifying events (reduced hours, death in the family). It allows you to temporarily keep your employer-sponsored health insurance, giving you peace of mind during a transition.
The IRS Excise Tax is $100 per day, per qualified beneficiary from the date of infraction to the date of correction. The DOL penalty is up to $110 per day per qualified beneficiary.
To minimize the risk of expensive fines and legal trouble, it's crucial for employers to understand and adhere to COBRA regulations.
COBRA protects employees, and offering it correctly protects your business.
ERISA (Employee Retirement Income Security Act) is a powerful federal law that ensures fairness and security for participants in private-sector retirement and health plans. While it doesn't directly provide benefits, it sets minimum standards for how these plans are managed and protects your rights as a participant.
If your company offers a group health or retirement plan, chances are it falls under ERISA regulations. However, some organizations, like government entities, are exempt.
The next three questions are critical for ERISA Compliance!
Don't let a dusty ERISA plan document cause headaches! An outdated document can lead to compliance issues, employee confusion, and administrative roadblocks.
Keep your plan current and compliant. This ensures clear communication, protects employee rights, and minimizes risk for everyone involved. It's a win-win for your company and your employees.
A clear and up-to-date Summary Plan Description (SPD) is a win-win for everyone.
A compliant SPD ensures:
SPD Content examples: Plan Name and Type, Plan Sponsor information, Eligibility and Benefit Details, Claims Procedures, plus Rights and Responsibilities.
Having all current ERISA notices and disclosures readily available keeps employees informed and helps ensure plan compliance.
Moreover, it's fantastic risk management.
ERISA (Employee Retirement Income Security Act) plays a vital role in safeguarding employee benefit plans, including health and welfare plans. It sets minimum standards for how these plans are administered, ensuring fairness and security for participants. But what happens if these standards aren't met?
The Annual Cost for Non-Compliance is Billions!
ERISA regulations can lead to penalties for both the plan itself and the individuals responsible for managing it (fiduciaries).
Department of Labor (DOL) Penalties: up to $110 per day, per qualified beneficiary. (For example, an employee, spouse, or child covered under the plan).
IRS Excise Tax: The IRS can assess excise taxes for various ERISA violations, $100 per day, per qualified beneficiary, and doubles to $200 per day for a family. There's also a minimum penalty of $2,500 and a maximum capped at the lesser of 10% of the employer's total health plan costs for the prior year or $500,000.
Civil Penalties: The Department of Labor (DOL) can impose hefty fines for various violations, such as:
Fiduciary Liability: Individual fiduciaries who breach their responsibilities under ERISA can be held personally accountable for losses incurred by the plan. This could involve actions like:
Thanks for completing the assessment! We hope it gave you valuable insights into your company's compliance strengths and areas for improvement.
Whether you handle compliance in-house or outsource it, ensuring you meet federal and state regulations is crucial. This helps protect your employees and your business.
PrimePay provides comprehensive administration services to navigate these compliance complexities: POP with Nondiscrimination Testing, COBRA or State Continuation, and ERISA.
Our Benefits Compliance Bundle is easy to use, provides fantastic risk management, and is smartly priced.
All of these three administrative requirements for $129 per month or $4 per employee per month.
PrimePay Benefits Compliance is smart Business!