Since employer-sponsored benefits began in the 1970s, companies have struggled with the complexities of administrative compliance. Managing healthcare, insurance, and retirement plans requires staying current with ever-evolving regulations while protecting sensitive employee data.
Non-compliance can lead to hefty fines, legal consequences, and reputational damage that impacts employee morale and recruitment. Partnering with an experienced BPO provider can mitigate these risks, ensuring regulatory adherence while streamlining benefits administration.
Why Compliance in Employee Benefits Is More Challenging Than Ever
Keeping up with federal and state regulations, such as ERISA, ACA, HIPAA, and COBRA, is a major compliance hurdle for employers.
ERISA (Employee Retirement Income Security Act)
Enacted in 1974, ERISA governs private employee benefit plans, ensuring fiduciary responsibility and proper management. Employers must provide participants with plan details, safeguard funds, and guarantee qualified beneficiaries receive their benefits.
ACA (Affordable Care Act)
Since 2010, ACA mandates have required Applicable Large Employers (ALEs) to offer affordable health insurance with minimum essential coverage (MEC) and prohibit favoritism toward highly compensated individuals. Employers must also report workforce and plan details to the IRS annually.
HIPAA (Health Insurance Portability and Accountability Act)
Passed in 1996, HIPAA establishes strict guidelines for protecting personally identifiable health information (PHI). Employers managing health plans must follow strict storage, usage, and sharing protocols to prevent unauthorized disclosures.
COBRA (Consolidated Omnibus Budget Reconciliation Act)
COBRA, enacted in 1985, ensures employees and dependents can continue healthcare coverage after job loss or significant life changes. Employers with 20+ employees must meet notification deadlines, and many states impose additional “mini-COBRA” rules.
Failure to comply with these regulations can result in severe financial penalties. Employers must also adhere to compliance requirements for tax-advantaged benefits accounts.
The Cost of Mismanaging Tax-Advantaged Accounts
Tax Reporting
Employers must report contributions to FSAs, HSAs, and HRAs on employee W-2 forms and, except for some HSA plans, also validate reimbursement claims. Failure to comply can lead to IRS audits and penalties.
Data Privacy and Security Risks
Handling FSAs, HSAs, and HRAs requires robust data security to prevent breaches of employees’ financial and healthcare information. A breach can erode employee trust and expose them to fraud risks.
How BPO Reduces Compliance Risks
Outsourcing benefits administration to a trusted BPO provider ensures compliance, reduces penalties, and safeguards employer reputation.
Ensuring Timely COBRA Notifications and Payments
Managing COBRA compliance requires precision. Employees must receive notifications within 45 and 60 days of qualifying events. Failure to comply results in penalties of $110 per day under ERISA plus $100 per day per beneficiary under IRS rules. Quality BPO providers automate tracking and notifications to ensure accuracy.
Secure Handling of PHI under HIPAA
Are your employees adequately trained to handle PHI? An experienced BPO provider offers sophisticated security measures, including end-to-end encryption, strict access controls, and ongoing staff training to prevent compliance breaches.
Automated Benefits Reporting and Audit Documentation
BPO solutions enhance transparency by automating ACA reporting (1095-C, 1094-C), Form 5500 filings, and other compliance documents. This reduces human error and ensures employers are audit-ready.
Keeping Up with State and Federal Regulatory Changes
Staying informed about changing laws is crucial. Experienced BPO providers monitor regulatory updates and ensure benefits plans remain compliant. For example, 13 states and Washington, D.C., have recently enacted mandatory paid family leave laws, requiring plan adjustments. A dedicated compliance expert ensures employers meet new requirements.
The Value of a SOC 2- and HIPAA-Compliant BPO Provider
Employee benefits data must be tightly controlled. Choosing a HIPAA- and SOC 2-compliant provider ensures strict data security protocols.
SOC 2 compliance assesses security controls for cloud-stored customer data. While not legally required, it demonstrates a BPO provider’s commitment to data privacy, confidentiality, and risk management.
Time, Money, and Peace of Mind
Employee benefits compliance is increasingly complex, requiring ongoing regulation updates, secure data handling, and timely member communication. In-house teams often struggle with these tasks while managing other priorities.
While compliance software can help, these tools are expensive and require constant updates. Outsourcing benefits administration to a knowledgeable BPO provider saves time and money while ensuring peace of mind.
Contact Accelergent Growth Solutions today to learn more about our compliant BPO services.