Open enrollment is a hectic and critical period for employers that often brings a risk of compliance errors. These mistakes can confuse employees and cause missed benefits, while also exposing employers to legal risks.
This article highlights five common compliance pitfalls to avoid during open enrollment:
- Ineffective Communication of Benefit Changes – Benefit offerings often change annually due to plan design updates or regulatory mandates. Employers must clearly notify employees of any changes, including cost-sharing adjustments and new benefits, well before open enrollment. Using multiple communication channels and simple explanations helps employees make informed choices. Updates should also be reflected in required plan documents like the Summary Plan Description (SPD) or Summary of Material Modifications (SMM).
- Overlooking Election Deadlines - Open enrollment periods should end well before the new plan year to allow orderly processing and compliance with tax laws. Employees’ benefit elections under Section 125 cafeteria plans are typically irrevocable for the plan year unless a qualifying life event occurs. Clear communication and encouraging early enrollment help prevent late or mistaken elections, which are difficult to correct.
- Failing to Distribute Required Health Plan Notices - Employers must provide various health plan notices during open enrollment, such as the Summary of Benefits and Coverage (SBC), COBRA notices, CHIP notices, WHCRA notices, Medicare Part D disclosures, and HIPAA privacy notices. These notices ensure employees are informed of their rights and plan details and must be delivered in timely fashion. Electronic delivery is often permitted with proper safeguards.
- Not Providing Materials to All Eligible Individuals – It’s crucial to distribute open enrollment information not only to active employees but also to eligible individuals on leave, furlough, or COBRA continuation. A multi-channel approach with diligent tracking of distribution reduces the risk of missed communications and potential disputes.
- Neglecting Disclosure of Reasonable Alternatives in Wellness Programs - Wellness programs that impose surcharges or provide rewards based on health standards must offer reasonable alternative ways to meet requirements, per HIPAA rules. Employers need to disclose these alternative standards and provide contact information and assurance that personal physician recommendations will be accommodated. Compliance reduces legal risks related to premium surcharges and discrimination claims.
By proactively addressing these areas, employers can help employees confidently choose benefits while reducing compliance risks and administrative challenges.