In the past, employee benefits were very simple for most employers. They picked out a benefit plan and offered it to their employees, and then if they became large enough, there would be some forms such as Form 5500 that they would need to file with the Internal Revenue Service (IRS) at some point. With the health care reform of the last few years slated to expand even more starting next year and moving onward, the complexity and the number of regulations and requirements to comply with those regulations is going to go off the charts. I liken it to the Internal Revenue Code for individuals and businesses. As an individual a person certainly can have a program to file his or her own taxes, but that is for the very straightforward, single employer, one income type of scenario. If an employee is a high-income earner or an employer, he or she needs to have a tax expert filling out the forms and ensuring compliance in the right way in order to be forward thinking in that regard. With the health care regulations that are in place now and upcoming, employers are going to need to use same approach with regard to employee benefit programs. The audits are increasing. The complexity of the regulations is increasing. Quite frankly, it is daunting from the standpoint of an employer who may have many other business items to manage aside from the additional burden with which they need help.
A brave new world is a great way to frame benefits planning. In the past, large employers have had all the resources they need at their fingertips. They have had either outside counsel or inside infrastructure with people who specialize in various aspects of tax, employee benefits and human resources. They were able to draw on the expertise of specialists to make sure that they were complying with the codes and regulations, staying on track and doing things in the right way. Small and midsize employers have always been challenged because they do not necessarily have the budget to hire the outside counsel on a continuing basis, and they do not have the budget and the revenue to support inside people specializing in those areas. Very often, small and midsize employers are trying to catch up when it comes to regulation when something is absolutely, positively due, or unfortunately and more importantly, when the IRS, Department of Labor (DOL) or Health and Human Services knocks on their door and says, “We’re here today and we would like to take a look at how you are doing things.” When the government knocks on an employer’s door, the real problem begins.
The small and midsize employer needs to have somebody to be their watchdog or advocate in terms of regulations and compliance. As I mentioned before, most of these employers do not have an internal staff or experts on the outside that they can hire on an ongoing basis to keep them on the straight and narrow all the time. They have to be reactive rather than proactive. With regard to employee benefit plans, a good broker and consultant can act as that steady hand on the tiller, so to speak, to get the employer through potential land mines that are waiting for them down the road. The way they do that is by planning, being proactive and keeping them on a checklist as it relates to these regulations. They make sure that the employer knows in advance what is expected of them, and that they know how to prepare a document so that if they get a knock on the door from one of those various government agencies like the IRS or DOL, they are prepared and ready to go. A good broker will help prepare clients for upcoming events. In this new environment, this brave new world, it is more than likely going to happen at some point. It is not a matter of if; it is a matter of when.