Once annual enrollment has come and gone, it’s a good time to brush up on basic benefit plan requirements to avoid common mistakes in employee benefit plan administration. The list below highlights frequent issues employers should check in routine reviews; for guidance related to small-business bond and compliance resources, see Small Business Administration Bonds.
Employers with safety-sensitive or training needs may also find helpful resources on workplace training and compliance at Workplace Safety and Employee Training.
Common mistakes to avoid
- Keep your plan documents up to date and reference them in related plan communications. ERISA requires a written plan document; it should be reviewed and amended as needed to reflect law and regulatory changes. Use the plan document as the controlling reference in disclaimers and enrollment materials.
- Keep summary plan descriptions (SPDs) current and distribute them to employees. ERISA requires SPDs for each benefit plan and specifies required content. Vendor booklets often do not meet SPD requirements; when plan changes occur, provide a summary of material modifications until a revised SPD is available.
- Include only eligible employees and dependents in your plans. Covering ineligible individuals (contractors, leased workers, former employees) or dependents who have aged out increases costs and can violate plan terms. Regular eligibility audits reduce this risk.
- Follow plan terms in administrative practices. The written plan governs; both internal staff and third-party administrators must follow plan provisions when determining eligibility, processing claims, issuing notices, and handling appeals.
- Make sure plan contributions are calculated properly. Use the plan’s defined compensation formula (which may include bonuses or commissions) and calculate matching and profit-sharing contributions per plan terms.
- If employees pay for benefits on a pretax basis, adopt a cafeteria plan. A cafeteria plan is required before employees can pay health, dental, or vision premiums on a before-tax basis or contribute pretax to health or dependent care flexible spending accounts.
- If employees make salary deferrals to a 401(k) plan, deposit those deferrals into the plan trust on a timely basis. By regulation, employee deferrals become plan assets as soon as they can be reasonably segregated from the employer’s general assets.
- Review COBRA administrative practices to ensure all qualified individuals receive required notices for each plan subject to COBRA, including health, dental, vision, and health care flexible spending accounts.
Administrative errors can lead to fines, penalties, lawsuits, and employee dissatisfaction. Employers in construction or hazardous operations should also review industry-specific guidance, such as Managing Hazardous Materials and Employee Benefits in Construction, when conducting plan reviews. If you need further assistance, consider taking the next step and talk to an agent.
Frequently Asked Questions
What is a summary plan description (SPD)?
An SPD is a required, plain-language document that explains key plan provisions, participant rights, and claim procedures for each employee benefit plan.
When must 401(k) employee salary deferrals be deposited?
Employee deferrals must be deposited into the plan trust as soon as they can reasonably be segregated from the employer’s assets, and employers should follow Department of Labor guidance on timing.
When is a cafeteria plan required?
A cafeteria plan must be in place before employees may pay qualified benefits such as health or dependent care contributions on a pretax basis.