Employee benefits play an important role in the lives of employees as well as their families. For that reason, the benefits you offer can be a deciding factor for a potential employee’s decision to work at your business.
There are two types of employee benefits: (1) those the employer must provide by law; and (2) those the employer offers as an option to compensate employees. Examples of required benefits include social security and workers' compensation, while optional benefits include health care insurance coverage and retirement benefits. Both required and optional benefits have legal and tax implications for the employer.
This guide helps employers understand what they need to do to supply employee benefits required by law, as well as steps they need to take to comply with regulations covering optional employee benefit plans.
For requirements specific to third-party employee benefit plan administrators and fiduciaries, visit Employee Benefits: Requirements for Plan Administrators and Fiduciaries.
Required Benefits
Social Security Taxes
Every employer must pay social security taxes at the same rate paid by their employees. The Social Security Administration offers information about how to file an employer Form W-2, how to hire employees not covered by social security and other information for employers:
Provides basic information and resources for employers.
Offers a suite of applications enabling organizations and authorized individuals to conduct business with and submit confidential information to the Social Security Administration.
Gives a comprehensive guide to filing Form W-2 with the Social Security Administration. Employers may file electronically.
Provides instructions on what you should do if you hire an individual not covered by social security.
Unemployment Insurance
Businesses with employees are required to pay unemployment insurance taxes under certain conditions. If your business is required to pay these taxes, you must register your business with your state's workforce agency. The State and Local Tax page includes links to your state's agency.
Workers Compensation
Businesses with employees are required to carry Workers' Compensation Insurance coverage through a commercial carrier, on a self-insured basis, or through the state Workers' Compensation Insurance program. Visit the Workers' Compensation page for more information..
Disability Insurance
Some states require employers to provide partial wage replacement insurance coverage to their eligible employees for non-work related sickness or injury. Currently, if your employees are located in any of the following states, you are required to purchase disability insurance:
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California - Employment Development Department
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Hawaii - Unemployment Insurance Division
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New Jersey - Dept. of Labor and Workforce Development
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New York - New York State Workers' Compensation Board
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Puerto Rico - Departamento del Trabajo y Recursos Humanos/Department of Labor and Human Resources
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Rhode Island - Rhode Island Dept. of Labor and Training
Leave Benefits
The majority of common leave benefits offered by employers are not required by federal law, and are offered to employees as part of the employer's overall compensation and benefits plan. These leave benefits include holiday/vacation, jury duty, personal leave, sick leave and funeral/bereavement leave. However, employers are required to provide leave under the Family and Medical Leave Act (FMLA).
Family and Medical Leave
The Family and Medical Leave Act provides an entitlement of up to 12 weeks of job-protected, unpaid leave during any 12-month period to eligible, covered employees for any of the following reasons:
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Birth and care of the eligible employee's child, or placement for adoption or foster care of a child with the employee
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Care of an immediate family member (spouse, child, parent) who has a serious health condition
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Care of the employee's own serious health condition. FMLA requires group health benefits to be maintained during the leave as if employees continued to work instead of taking leave. FMLA applies to private employers with 50 or more employees, and to all public employers. The following resources provide employers with information on how to comply with FMLA:
Explains employer responsibilities under FLMA.
Health Plans
COBRA Benefits
Consolidated Omnibus Budget Reconciliation Act (COBRA) provides certain former employees, retirees, spouses, former spouses, and dependent children the right to temporarily continue health coverage at group rates. Businesses are required to provide COBRA when employees are terminated or laid off. The following resources describe an employer's requirements under COBRA.
Offers a booklet that summarizes COBRA continuation coverage and explains the rules that apply to group health plans. Information contained in the booklet is intended to assist employers that sponsor group health plans comply with COBRA.
Provides questions and answers to aid in the general explanation of requirements under the Consolidated Omnibus Budget Reconciliation Act (COBRA) for continuation of group health coverage that might otherwise be terminated.
Summarizes COBRA continuation coverage and explains the rules that apply to group health plans in Spanish. The booklet offered is intended to assist employers that sponsor group health plans with COBRA.
For more information visit Health Care and Health Care Reform.
Retirement Plans and Pensions
Selecting a Plan
Provides an interactive question and answer tool to help self-employed individuals and small business employers determine which type of retirement plan is most appropriate for their businesses.
Offers a pamphlet describing the retirement savings options available to small businesses and comparing the features of each option.
Gives tips to help an employer comply with ERISA's fiduciary responsibility provisions when selecting and monitoring a service provider for its plan.
Provides a guide to help employers understand legal requirements for pension plans.
Types of Plans
Provides information on SEP Retirement plans as an option for small businesses. The publication describes the plan's features and provides assistance to establish and maintain the plan.
Explains the SIMPLE (Savings Incentive Match Plan for Employees of Small Employers) IRA Plan. SIMPLE IRAs provide employers and their employees with a simplified way to contribute toward retirement.
Offers information on a payroll deduction IRA program for employers who want to help their employees save for retirement but don't want the responsibility of an employee benefit plan.
Details information on 401(k) plans as a retirement plan option within a publication jointly created by the Department of Labor and the Internal Revenue Service. The guide provides assistance in how to establish and maintain the plan, and discusses the various features of this type of savings plan.
Provides a form created by the Investment Company Institute, the American Bankers Association and the American Council of Life Insurers to assist employers in making "apples to apples" comparisons of retirement plan services and fees. An employer can provide this form to prospective service providers to its retirement plan to obtain necessary information.
