Benefits Compliance Check

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. 

Free Compliance Check

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. 

Here to Educate

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. 

How many employees do you have?
Does your company offer employee benefits?
Does your company offer pre-tax contribution options for employee benefits, such as health insurance, dental insurance, or life insurance?

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

  1. Plan Document
  2. Summary Plan Description 
  3. Mandatory Annual Nondiscrimination Testing
Do you have an updated, regulatory compliant Premium Only Plan Document?

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. 

Do you have an updated, regulatory compliant POP Summary Plan Description (SPD)? Have you provided the SPD to all eligible employees within 90 days of their initial coverage effective date?

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. 

Do you complete the annually required Nondiscrimination Testing for your Premium Only Plan (POP)?


Premium Only Plans (POPs) Require Non Discrimination Testing

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.

…….It’s Critical for Compliance

Since you answered no or don't know on any or all of the above,

you are NOT likely in compliance.

Heads Up!

Your Premium Only Plan (POP) Might Need an Update

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: 

  • Disqualification of the POP Plan: Without a compliant document, the IRS might disqualify the plan entirely. This means employee contributions to premiums would be considered taxable income, leading to tax penalties and back taxes for both the employer and employees.
  • Fines and Penalties: The Department of Labor (DOL) can also impose fines for non-compliance with POP regulations. 

For Employees: 

  • Increased Tax Burden: If the POP is disqualified, employees would lose the tax advantage of pre-tax contributions. They would have to pay taxes on the deducted premium amounts, potentially leading to a higher tax bill.
  • Uncertainty and Confusion: The lack of a clear plan document can confuse employees regarding their benefits and tax implications. 

State Continuation of Employee Benefits

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. 

Does your state require state continuation?
When an employee experiences a qualifying event (like termination or reduced hours) are you aware of their rights under state continuation coverage, are you familiar with the required notification details and timelines in our state?

Why it’s Important!

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.

For continuation coverage purposes, can you confirm the employee's eligibility, the maximum duration they can continue coverage, and their cost responsibility (likely full premium payment)

Why it’s Important!

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.

Since you answered no or don't know on any or all of the above,

you are NOT likely in compliance.

State Continuation Coverage:

Avoid Costly Mistakes

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:

  • Reduces Financial Risk: Steer clear of hefty fines by following the continuation coverage rules in your state.
  • Protects Your Business from Lawsuits: Upheld employee rights minimize the chance of costly legal action.
  • Promotes Positive Employee Relations: Fulfilling your obligations demonstrates fairness and fosters trust with your employees.

Remember: There's no one-size-fits-all approach. Penalties and requirements can differ significantly by location.

Taking Action:

  • Research your state's specific continuation coverage regulations.
  • Consult with a qualified benefits advisor to ensure proper plan administration.

By taking these steps, you can ensure compliance and avoid the hassle and expense of non-compliance.


Don't Get Stuck Without Coverage

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.

Why Employers Need to Offer COBRA (and Do it Right):
  • Avoid Hefty Fines: Failing to offer COBRA or making administration mistakes can be very expensive.  The IRS or DOL levies per-day fines for each affected beneficiary.  

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.

  • Sidestep Lawsuits: Denying rightful COBRA coverage can trigger employee lawsuits, resulting in lengthy legal battles and significant costs – think health claims liabilities.  A court can order the employer to cover the qualified beneficiary's medical expenses incurred during the COBRA violation period if the employee wins a lawsuit.

To minimize the risk of expensive fines and legal trouble, it's crucial for employers to understand and adhere to COBRA regulations.

The Bottom Line:

COBRA protects employees, and offering it correctly protects your business.

COBRA regulations can be complex. Can you confirm you are in compliance with all COBRA notification requirements?

COBRA Notice Examples:

  • Initial Notice of COBRA Rights and Responsibilities
  • COBRA Eligibility and Election Notice
  • Premium Deficiency Grace Period Notice
  • COBRA Social Security Disability Extension Notice
Do you have a COBRA Procedures Manual? The COBRA Procedures Manual is often the first item the Department of Labor requests in a COBRA inquiry or audit.
Every employer must maintain a written guide of when and what must be done for COBRA compliance.
COBRA helps employees continue group health insurance after certain events. Are you familiar with the key deadlines for COBRA notices (informing employees of their rights), election periods (when they can decide to continue coverage), and premium payments?
Hint; 90, 14, 30, 14, 60, 45, 30; Knowing these timeframes are key for compliance!

Since you answered no or don't know on any or all of the above,

you are NOT likely in compliance.

Understanding ERISA:

The Backbone of Employee Benefit Plans

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.

Who Does ERISA Apply To?

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!

Do you have an updated, regulatory compliant Plan Document?

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.

Do you have an updated, regulatory compliant Summary Plan Description?
Empower your Employees...

A clear and up-to-date Summary Plan Description (SPD) is a win-win for everyone.

A compliant SPD ensures:

  • Informed Decisions: Employees can confidently navigate their benefits with clear information.
  • Reduced Confusion: No more mysteries! A well-written SPD clarifies rights and responsibilities.
  • Compliance Made Easy: Avoid penalties and ensure you're meeting all ERISA regulations.

SPD Content examples:  Plan Name and Type, Plan Sponsor information, Eligibility and Benefit Details, Claims Procedures, plus Rights and Responsibilities.

Does your plan documentation include all the current ERISA notices and disclosures? Such as: Women’s Health and Cancer Rights Act (WHCRA), Mental Health Parity Act (MHPA), Children’s Health Insurance Program Reauthorization Act (CHIPRA).
Missing required ERISA notices can lead to confusion and potential legal issues.
Double-check for a win win...

Having all current ERISA notices and disclosures readily available keeps employees informed and helps ensure plan compliance. 

Moreover, it's fantastic risk management. 

Since you answered no or don't know on any or all of the above,

you are NOT likely in compliance.

The Importance of ERISA Compliance:

Protecting Your Employee Benefit Plans

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!

Failing to comply with...

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:

  • Missing required plan documents or summaries for participants.
  • Improperly handling claims processing or denials.
  • Engaging in unauthorized transactions with plan assets.
  • Failing to meet COBRA continuation coverage requirements.

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:

  • Misusing plan assets for personal gain.
  • Making risky investment decisions that harm the plan.
  • Failing to act in the best interests of plan participants.
Your Benefits Smart Compliance Assessment Results

Thanks for completing the assessment! We hope it gave you valuable insights into your company's compliance strengths and areas for improvement.

Focus on Compliance, No Matter Your Approach

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: Your Compliance Partner 

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!

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