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Business Guidance

HR Pros: Are you ready for year-end?

3 minute read time

At the end of each year, human resources managers face a flurry of compliance and regulatory requirements. Ensuring your communications, notifications and filings are timely and correct is critical and can help you avoid lawsuits as well as potential state and federal penalties for noncompliance.

Watch Out for Common Pitfalls

“Whether from lack of awareness or a mistaken belief that a particular regulation doesn't apply, employers can often be caught off guard,” says Jason Gutzman, Vice President, Employee Benefits Consultant, Johnson Financial Group. “Notices from the Department of Labor (DOL) regarding a site visit or audit are increasing in frequency so implementing best practices for compliance, such as conducting an annual self‐audit, may help protect your organization from penalties or litigation. A general rule of thumb for employers visited by a DOL field office examiner is to be able to demonstrate a good faith effort to be compliant.” Following are some areas employers may find challenging:

  • Annual Summary of Benefits and Coverage (SBC) notification. HR is required to distribute an SBC annually to employees, in particular, prior to a new plan year. “Often the SBC is sent late, isn't distributed at all, or a prior‐year version is sent in error,” Gutzman says. “The penalty for noncompliance can be high.”
  • Outcome‐based wellness programs. Employers sponsoring these types of programs face myriad compliance landmines. “Incentives and tobacco penalties and disincentives have to be structured in certain ways to avoid lawsuits or action taken by the Equal Employment Opportunity Commission (EEOC),” Gutzman explains. “Review your prior year's notices and premium incentives to ensure you're still in compliance.”
  • Affordable Care Act (ACA) requirements. “There's been some confusion this past year because the individual mandate has been eliminated,” Gutzman says. “That doesn't mean large employers are off the hook. These are distinct issues, and the employer mandate remains.” Large employers (50 or more full‐time employees) must comply with section code 6055 and 6056 reporting. It's also important to test the contribution schedule for the new year to make sure it meets ACA health plan affordability rules. “The employee's contribution for self‐only plans has increased to 9.86 percent of the employee's household income for 2019. Test new contributions tied to open enrollment to make sure you meet the threshold,” Gutzman adds.
  • Electronic communications. Electronic communications are efficient and can save time and money, but there are guidelines under the Employee Retirement Income Security Act (ERISA) for electronic distribution of certain kinds of information. Make sure yours meet the requirements.
  • Annual HSA and FSA limits. Confirm that plan documents are consistent with new limits.
  • State‐specific issues. “For example, there is sometimes confusion in Wisconsin about what you can or cannot do regarding health plan spousal carve outs or surcharges,” Gutzman says. “They are popular tactics that should be discussed with legal counsel and a broker.” Small employers (to simplify, we'll use the ACA threshold of fewer than 50 full‐time employees) have a shorter to‐do list. “But that doesn't mean you are immune from potential penalties that result from failing to distribute notices,” Gutzman says.

Stay Informed and Up‐to‐Date

You should expect proactive communication from a trusted partner who can help you stay updated on requirements and deadlines. “You can also take advantage of HR‐targeted webinars or seminars,” Gutzman says. “Many of them are free and hosted by law firms, accounting firms, insurance carriers and brokers.”

An annual audit with your insurance provider, a robust self‐audit process and regular communications with your compliance advisors can help you survive an audit, as well as avoid penalties and employment practice liability claims.