Employers that offer an array of benefits  to their employees have done so often to  keep their compensation packages  competitive in the marketplace. Offering  retirement and certain fringe benefit  programs can be particularly costefficient, provided that the employer  complies with the rules allowing for  tax relief. 

Healthcare coverage is undergoing  fundamental change thanks to the  Affordable Care Act (ACA or  “Obamacare”).  These changes affect how  employers are evaluating their health  benefits for employees. 

The following is a checklist of issues for  employers to keep in mind as they  manage employee benefits programs.

  1. Retirement Plans
  1. Does the employer have the best  type of retirement plan for its  workforce, and does it meet the  highest priority goals? Choosing the  right plan design is one basic key to  meeting retirement goals. 
  2. Have the employer's Cycle D  individually-designed retirement  plans been filed with IRS for a new  tax determination letter? (An  employer is a Cycle D filer if the  employer’s federal tax identification  number ends in 3, 4, 8 or 9.)  Having  an up-to-date  tax determination  letter provides evidence that the  money held in the retirement plan is  not subject to immediate tax.
  3. If the retirement plan is on a  prototype document, have all the  interim amendments been made  and signed timely? Not having  made interim amendments timely  can adversely affect the tax shelter of  the plan.
  4. Are the retirement plans amended to  allow for spousal rights to  participants in same-sex marriages?
  5. Is the plan’s summary plan  description up to date?  The law  requires employers to distribute  summaries of the retirement plan  and any material plan changes  periodically.  Such summaries are  also an important way for employers  to communicate the retirement  benefits available to employees.
  6. If the retirement plan has more than  100 employees, has the employer  made arrangements to have outside  auditors audit the retirement  plan?  Audits are required as part of  the annual Form 5500 with the  federal government. They are  also an important tool for  catching operational errors and  other problems.
  7. Is the proper amount of employer  contributions made timely to the  plan? Missing the deadline can mean  missing a deduction on the  employer ’s tax return for the  prior year.
  8. Are 401(k) deferrals deposited into  the plan as soon as administratively  practicable and fast enough to  satisfy U.S. Department of Labor  requirements?  Failing to meet the  deposit rule timely can subject the  employer to penalties and the cost  of correction.
  9. Do the retirement plans meet the  nondiscrimination tests, taking into  account all related business entities  and applicable employees?  Failing  such tests can adversely affect  the tax shelter of the plan if  not corrected.
  10. If employees select plan investments,  have the fiduciary responsibilities  been met for selecting investment  options?   Has a default investment  option been chosen that meets U.S.  Department of Labor standards?
  11. If investment managers select  investments, have they been meeting  the investment criterion set by  the employer?
  12. Do plan fiduciaries meet during the  year to review investments and  make changes as appropriate?  Is a  record kept of these meetings?
  13. Are plan administrative and  investment fees reasonable for the  services rendered?
  14. Are plan fiduciaries appropriately  bonded for the protection of  plan assets?
  15. Do plan fiduciaries have liability  insurance?
  16. Are plan operations being  appropriately monitored and  administered (e.g. plan eligibility,  vesting, loan programs, hardship  withdrawals, etc.)?
  17. Has the employer been meeting its  requirements regarding employee  disclosures and Form 5500 filing  requirements?
  1. Health Plans 
  1. Have the balances in health flexible  spending accounts been limited  to $2,500? 
  2. For reimbursements of medical  costs over $2,500, has the  employer considered other taxfavored strategies?
  3. Have the flexible spending accounts  been “integrated” with the  employer’s regular medical plan to  ensure compliance with the ACA?
  4. Is the employer’s cafeteria plan up  to date?
  5. Will the employer’s health plan be  updated to comply with the ACA?   Planning now for ACA changes  helps employers anticipate and plan  for any increased costs.
  6. Has the employer put a strategy in  place for dealing with the employer  mandate under the ACA?
  1. Other Employee Issues
  1. Has the employer stopped imputing  compensation income and withholding  tax on employees receiving benefits  for same-sex spouses?  
  2. Is the employee handbook up  to date?
  3. Has the employer considered having  employment agreements, severance  programs and/or deferred  compensation packages for its  executives?  If so, are those  programs tax efficient and in  compliance with applicable law  and reporting requirements?