Introduction

For many employers, employee benefits compliance can feel like a moving target. Between ongoing administrative responsibilities, evolving regulations, and emerging litigation trends, it’s easy to focus only on immediate deadlines while overlooking broader compliance risks.

This webinar takes a “spring cleaning” approach to benefits compliance, combining a review of key deadlines with a practical look at plan documentation, operational gaps, and areas that often go unchecked. It also highlights several regulatory and legal developments that may influence plan strategy in the near future.

The goal is not just to stay compliant, but to help employers build more consistent, defensible processes around how benefits are designed, administered, and monitored.

Key Takeaways

• Several critical compliance deadlines occur throughout the year, with some tied to plan year timing and others fixed regardless of plan structure
• Plan documentation and eligibility rules should be reviewed annually to ensure they reflect actual plan operations
• Fiduciary responsibility is becoming a growing focus, especially with increased litigation around vendor selection and plan oversight
• Common gaps exist in areas like leave of absence policies, nondiscrimination testing, and mental health parity documentation
• New regulations, particularly around pharmacy benefit managers and compensation transparency, will increase access to plan data and oversight expectations
• Alternative plan strategies like ICHRAs continue to grow, especially for specific employee classes or remote workforces

Key Compliance Deadlines and Reporting Requirements

What deadlines should employers be tracking?

While some compliance requirements depend on your plan year, several key deadlines remain consistent:

• Form 1095 distribution: Due to employees by early March
• IRS filing (Forms 1094/1095): Due by March 31
• RxDC reporting: Due June 1 (often earlier if handled by vendors)
• PCORI fees (self-funded plans): Due July 31
• Gag clause attestation: Due December 31

How do vendor deadlines affect compliance?

Many employers rely on carriers or third-party administrators (TPAs) for reporting. However:

• Vendors often require earlier internal deadlines to complete filings
• Employers are still responsible for providing accurate data
• Missing a vendor deadline may require partial or manual filings

What happens if filings are late?

Penalties for reporting failures can be significant:

• Up to $340 per form for ACA reporting failures
• Penalties may double if both filing and distribution requirements are missed
• Reduced penalties may apply if corrected quickly

Plan Documentation and Operational Alignment

Why is plan documentation so important?

Plan documents are the foundation for:

• Communicating employee rights and benefits
• Guiding plan administration
• Supporting compliance in audits or disputes

While updates are not required annually, best practice is to review documentation each year to confirm:

• Benefits listed are accurate
• Eligibility rules match actual administration
• Supporting documents (SPDs, SBCs, certificates) are current

Are your eligibility rules clearly defined?

Common issues include:

• Vague definitions of full-time status
• Inconsistent rules across benefit offerings
• Lack of clarity for dependents, spouses, or domestic partners

Clear documentation helps avoid confusion and ensures consistent application.

Leave of Absence and Benefits Administration

What happens to benefits during a leave of absence?

This is one of the most common compliance gaps.

Employers should clearly define:

• Whether benefits continue during different types of leave
• How employee contributions are handled (pay-as-you-go, catch-up, or termination)
• When coverage transitions to COBRA or state continuation

Without clear policies, employers may face inconsistent decisions and employee disputes.

Nondiscrimination Testing and Compliance Reviews

When should nondiscrimination testing be performed?

Testing should occur during the plan year, once participation data is available. This allows time to:

• Identify compliance issues
• Make adjustments before year-end
• Preserve tax advantages for highly compensated employees

What about mental health parity requirements?

Employers must ensure parity between:

• Mental health/substance use disorder benefits
• Medical/surgical benefits

This includes:

• Financial limits (copays, deductibles)
• Treatment limitations (visit limits)
• Nonquantitative factors (prior authorization, medical necessity)

A written comparative analysis is required and must be available upon request.

Organizational Structure and Tax Considerations

Do related entities impact compliance?

Yes. Ownership structure affects how benefits rules apply:

• Controlled groups (80%+ ownership) are treated as a single employer
• Less-related entities may trigger MEWA (Multiple Employer Welfare Arrangement) rules

These distinctions impact:

• Plan design
• Compliance obligations
• Risk exposure

Are benefits being taxed correctly?

Not all participants receive the same tax treatment:

• Owners, contractors, and domestic partners may not qualify for pre-tax benefits
• Employer contributions for these individuals may be taxable

Employers should review payroll and benefit structures early in the year to avoid corrections later.

Fiduciary Responsibility and Litigation Trends

Why is fiduciary responsibility getting more attention?

Recent litigation has expanded beyond retirement plans into health and welfare benefits, focusing on:

• Vendor selection (especially pharmacy benefit managers)
• Fee structures and transparency
• Conflicts of interest

What are employers expected to do?

Employers are not expected to be perfect, but they are expected to:

• Act in the best interest of plan participants
• Make informed, reasonable decisions
• Monitor vendors and plan performance
• Document decision-making processes

Tobacco Surcharges and Wellness Program Compliance

Are tobacco surcharges still allowed?

Yes, but they must comply with HIPAA wellness program rules.

Key requirements include:

• Incentives or penalties cannot exceed 50% of coverage cost
• A reasonable alternative standard must be offered
• Employees must be clearly informed of that alternative

What is the current legal trend?

Recent lawsuits have challenged:

• Lack of reasonable alternatives
• Poor communication of options
• Failure to apply rewards retroactively

While court outcomes have varied, regulators still recommend following existing guidance.

ICHRA: A Growing Alternative Strategy

What is an ICHRA?

An Individual Coverage Health Reimbursement Arrangement (ICHRA) allows employers to:

• Reimburse employees for individual health insurance
• Offer benefits to specific employee classes

When might an ICHRA make sense?

Common use cases include:

• Remote or geographically dispersed employees
• High-turnover or variable-hour workforces
• Employers struggling with participation requirements
• Supplemental offerings alongside traditional plans

What should employers consider?

Potential advantages:

• Predictable costs
• Reduced plan design responsibility
• Flexibility for employees

Potential challenges:

• Employee education and adoption
• Variability in individual market coverage
• Administrative coordination

Regulatory Updates to Watch

Pharmacy Benefit Manager (PBM) Reform

Recent legislation introduces:

• Mandatory reporting to plans
• Full rebate pass-through requirements
• Audit rights for employers
• Significant penalties for noncompliance

Timeline: Changes expected to take effect for plan years beginning in 2029.

Expanded Compensation Disclosure

New rules require:

• Disclosure from all service providers earning $1,000+
• Transparency before contracts are signed or renewed

This expands existing broker disclosure requirements.

Medicare Part D Creditable Coverage Changes

Beginning in 2027:

• The original simplified method will no longer be available
• Employers must use the revised simplified method or actuarial determination

Certain account-based plans (like HRAs) are now exempt from these requirements.

Potential HIPAA Security Rule Updates

Proposed changes may impact:

• Data security requirements
• Administrative processes

If finalized, employers will have time to comply, but should monitor developments.

Disclaimer

This content is provided for general informational purposes only and is not intended as insurance advice. Coverage, terms, and availability can vary by carrier and state. For guidance specific to your situation, we recommend speaking with a licensed insurance professional.

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