In today’s complicated regulatory environment, staing compliant can be a significant challenge for small businesses. Compliance is crucial for the sustainability and growth of any organization, and it involves adhering to vari-ous local, state and federal regulations and communicating with your employees on a clear, consistent basis. Here are some critical areas where small businesses should focus their compliance efforts:
Employee Handbooks
One of the fundamental aspects of compliance is clear communication with employees about company policies and regulations. Comprehensive employee handbooks outline company policies, procedures and expectations, ensuring that all employees are aware of what is expected of them, and provide a firm foundation for the overall business.
A well-written handbook can foster a stronger, more positive company culture, one in which policies are uniformly implemented. A handbook can be an electronic file stored online and shared electronically so employees and management can easily access it. It’s important to have documented acknowledgment that every employee has reviewed the handbook and agrees to follow the outlined policies.
Workplace Posters
Employers are required by law to display state and federal labor law posters that inform employees of their rights under various work-related laws and regulations. These posters include information about laws regarding employee rights, safety guide-lines and other important workplace rules. Employers must understand which posters they are required to display to avoid legal penalties and ensure that employees are informed about their rights and responsibilities.
COBRA Administration
The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a federal law that allows workers and their families who lose their health benefits the right to choose to continue group health benefits that were provided by their employer. COBRA benefits generally cover limited periods of time under certain circumstances such as voluntary or involuntary job loss, reduction in the hours worked, transition between jobs, death, divorce and other life events.
Navigating the complexities of COBRA administration can be challenging. If you’re an employer covered by the COBRA laws, you’ll need to familiarize yourself with the basics of the law, in-cluding which employees are eligible, which benefits are covered, the events that trigger coverage and what your communication duties entail. Outsourcing monthly COBRA administration to a trusted vendor offers many advantages, including saving time and money, avoiding costly penalties and gaining access to advanced technology and reporting capabilities.
Consumer-Directed Health Plan Administration
Premium Only Plans (POP), Health Savings Accounts (HSA), Health Reimbursement Arrangements (HRA) and Flexible Spend-ing Accounts (FSA) offer tax benefits for employers and employees, aiding in compliance and financial planning. When offering one of these consumer-directed health plans, you need to determine which employees are eligible to participate, notify them about contribution limits, the use-it-or-lose-it rules, as well as grace periods or carryover options. A wide array of eligible expenses can be reimbursed, including co-payments, over-the-counter medicines and miscellaneous medical items.
Employers must also create and adopt plan materials outlining critical details of the benefits offered, including a primary plan document, an adoption agreement and a summary plan descrip-tion (SPD). There are differences between an HSA, HRA and FSA, including account ownership, whether an account is por-table, if balances roll over each year and what the minimum and maximum contribution amounts are.
This is another service that is best left to experts who can manage the administration duties and reduce your payroll obliga-tions. A trusted vendor will provide you and your employees with the required legal documents and customer service for online account management, including submitting reimbursement re-quests with receipts, debit cards and a convenient mobile app.
Summary Plan Descriptions
In maintaining transparency and compliance, a detailed Sum-mary Plan Description (SPD) informs employees about their benefits and rights, avoids costly penalties and maintains a positive relationship with employees. The SPD should be provided within 90 days of insurance enrollment for new participants and within 30 days of a participant’s written request for a SPD. A SPD should be updated every five years, if material modifications are made during that period, or every ten years if no amendments occur within the plan.
ERISA-ACA Compliance
The Employee Retirement Income Security Act (ERISA) and the Affordable Care Act (ACA) require employers to provide participants with plan information, including a Summary Plan Description and Summary of Benefits & Coverages. These docu-ments contain important information about plan features and funding; provide fiduciary responsibilities for those who manage and control plan assets; require plans to establish a grievance and appeals process for participants to get benefits from their plans; and give participants the right to sue for benefits and breaches of fiduciary duty.
Your company should review its existing health plans for Minimum Essential Coverage, Minimum Value, and Affordability parameters. It is important to establish proper measurement, administrative and stability periods for employees, distribute all required health and welfare plan notices and fulfill applicable compliance reporting requirements to ensure you stay compliant.
The Earned Sick Time Act
The Earned Sick Time Act (ESTA) is a critical regulation that small businesses need to comply with, which went into effect on February 21, 2025. To help small businesses implement these new rules, SBAM has developed a complete ESTA Compliance Hub. This provides many valuable resources and guidance to ensure that businesses can navigate the complexities of ESTA and remain compliant.
Conclusion
Staying compliant is a continuous process that requires vigi-lance and proactive management. By leveraging the resources available through your SBAM membership, such as discounted employee handbooks, trusted COBRA administration and free expert advice, you can navigate the complexities of compliance and focus on your company’s growth and sustainability.
SBAM offers a full spectrum of services in human resources through our expert partners, Mavacy, American Society of Em-ployers and Kushner & Company. These services are designed for small businesses to help streamline your operations, enhance employee satisfaction and ensure compliance with regula- tions.
Visit our website at sbam.org/compliance to learn more.
By Kellie Nierynck; originally published in SBAM’s March/April 2025 issue of FOCUS magazine
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