Editor's note: Katie Clarey, new to both the HR Dive team and HR, usually writes Back to Basics. If you're new to the field (or just need a little refresher), follow along as she speaks with experts and lays out the basics of federal employment law. Today, however, Senior Editor Kate Tornone is subbing in, learning the basics of an area that has always daunted her — employee benefits. After all, everyone’s a rookie at something.
Employee benefits can prove challenging for new HR professionals, but they're a key piece of many business initiatives — from talent acquisition to legal compliance — so it's crucial to have a good understanding of what you offer, and what the law requires.
To get us started down the right path, I asked Jacob M. Mattinson, an associate with McDermott, Will and Emery for a benefits primer, and some tips for those just starting out.
Know your offerings
When you're new to the field (or just trying to boost your benefits knowledge), "one of the first and most important things to get a handle on" is the benefits package your company offers, according to Mattinson.
For example, find out whether your retirement plan is a defined contribution one, like a 401(k), or a defined benefit plan, like a pension. "Employers are trending more toward 401(k) plans right now," Mattinson told HR Dive, so that's what you're likely to find. But that's not how it used to be. Traditionally, most employers offered pension plans, or defined benefit plans. Those plans promise employees a certain monthly benefit after retirement, depending on their years of service with the company. With those plans, the employer carries all the risk. Because of market volatility, employers have moved away from them, shifting the risk to employees.
It’s also important to know what kind of health and welfare benefits your company offers. Is it just medical insurance? Or dental as well? Recently, more employers have been offering high deductible health plans (HDHPs), which are compatible with health savings accounts. This type of arrangement forces employees to be more judicious with their healthcare choice, Mattinson explained, and more employers are not only offering HDHPs, but offering only HDHPs.
Wellness benefits, through which employers incentivize healthy choices and lifestyles, are popular today, too. And then there are voluntary benefits — those that the employer facilitates but is otherwise uninvolved with. Think pet insurance. A company offers employees a bulk discount, but the employer doesn't contribute to the payment and is only responsible for paycheck deductions.
Mattinson said that even his more seasoned clients are often lacking this knowledge. First identify what types of plans you offer, he said, and then you can begin to review and understand your legal obligations.
Know your responsibilities
In the general sense, these benefits aren't mandatory, Mattinson said; they're largely incentives that employers offer to attract and retain talent. But that’s shifting somewhat, he noted. The Affordable Care Act has mandated a certain level of health insurance for employers with 50 or more employees. Those who don't comply are fined. And there's a movement at the state level to enact laws requiring employers to offer retirement plans.
There are, however, many federal laws controlling these benefits of which HR needs to be aware. Compliance can be complicated and attorneys and third-party vendors can help, but it's still up to employers to ensure, for example, that privacy requirements are followed and filing deadlines are met.
The Employment Retirement Income Security Act (ERISA) is "the primary law governing all of employee benefits land," Mattinson said. According to the U.S. Department of Labor, it sets minimum standards for most voluntarily established plans. Its requirements are very specific, Mattinson said, and noncompliance carries the potential for both financial and criminal penalties.
In practice, even a question from an employee can trigger ERISA requirements. For example, if an employee comes to HR and notes that they thought their benefit was different from the one received, HR can't always just reach a decision. Interactions like that can constitute a claim and appeal under the law, requiring that certain documents be provided within a certain timeframe. "Questions from participants are important to watch closely," he said.
Importantly, ERISA is "all about process," Mattinson noted. This means that you don't always have to reach the right answer, but ERISA wants employers to take the steps to try to reach the right answer. Moreover, employers are encouraged to self-report missteps and the government will generally work with employers to make participants whole, he said.
The Consolidated Omnibus Budget Reconciliation Act (COBRA), according to DOL, gives workers and their families who lose their health benefits the right to choose to continue group health benefits provided by their group health plan for limited periods of time under certain circumstances, such as voluntary or involuntary job loss.
Perhaps most notably for employers, the law has strict notice requirements. "Anytime someone loses coverage, then you really need to step back and analyze whether they're eligible" for COBRA, Mattinson said. Employers can face penalties if proper notices aren't sent, which can result in massive liability because "it typically only becomes an issue when somebody has an illness or something goes wrong."
The Health Insurance Portability and Accountability Act (HIPAA), among other things, controls how protected health information is shared, according to the U.S. Department of Health and Human Services. It's an issue that can arise with group health plans, as well as wellness programs, HHS notes.
The law is especially important to understand as companies use technology more, Mattinson said. There are very specific rules about how information must be stored. There also are limits on who can see information covered by HIPAA and, if a breach occurs, the law requires that notices be sent out.
"Any time you’re talking about personal information, especially under a medical plan, [HR and benefits professionals] need to step back and make sure they've gone through the necessary training," Mattinson said. This has been a very active area for government enforcement, he added, noting that employers have paid millions for what seemed like minor breaches. It's too easy to leave a laptop or files somewhere, he added, so protocols and training are key.
Training and organization
Understanding your benefits and the primary laws that govern them is a great first step. But deeper education is likely necessary, as is some external help if you don’t have a benefits expert on staff. There are just so many important nuances — fiduciary responsibilities and ERISA safe harbors for voluntary benefits, to name a few — that it can be difficult to prepare for every situation.
Mattinson's other tip? "Get a compliance calendar." These laws have deadlines that employers often miss, he said. "Getting organized is key, [as is] getting a compliance calendar so you know when different documents have to go out." The good news is that the agencies tasked with enforcement often offer guidance and model documents and notices employers can use. So make use of what's available, but call in the experts when it gets hairy.