A plan sponsor’s paperwork starts with the SPD

Once a business covers at least one employee who is not an owner or an owner’s spouse, its group health plan is generally an employee benefit plan under ERISA. The central document is the summary plan description, or SPD. It explains how the plan works and must be written for the average participant.

The deadlines on this page come from the Department of Labor’s reporting and disclosure guide, dated December 2022, so check the current DOL guidance before you put a date in the calendar. Under that guide, participants receive the SPD within 90 days after becoming covered, and a new plan has 120 days after it becomes subject to ERISA. The SPD goes out again every 5 years if the plan was amended, otherwise every 10. When the plan changes, a summary of material modifications is due within 210 days after the end of the plan year in which the change was adopted, and handing out an updated SPD satisfies it.

The Summary of Benefits and Coverage

The SBC is a standard template that describes a plan’s benefits and coverage, paired with a uniform glossary of terms. With an insured plan, the group health insurer provides the SBC to the plan.

The SBC goes out with enrollment materials and again at renewal or reissue. Special enrollees get it by the SPD deadline, 90 days from enrollment, and anyone who asks must receive it within 7 days. A material change during the year that affects what the SBC says needs notice at least 60 days before it takes effect; changes made at renewal fall outside that rule.

Form 5500 and the small-plan exemption

A welfare plan that is unfunded, fully insured, or a combination of the two, with fewer than 100 participants at the start of the plan year and meeting 29 CFR 2520.104-20, is exempt from filing the annual Form 5500. A similar plan with 100 or more participants must file, though it is spared the accountant’s report.

One exception reaches small groups: plans subject to Form M-1, the multiple-employer welfare arrangements, file Form 5500 whatever their size or funding. A plan exempt from filing has no summary annual report to send.

Notices at enrollment and every year

For a plan subject to federal COBRA, the COBRA general notice goes to covered employees and spouses when group health coverage begins. Once a year, employers tell every employee, enrolled or not, about possible state premium assistance through Medicaid or the Children’s Health Insurance Program, known as the CHIPRA notice.

HIPAA adds special enrollment rights. The plan gives a notice of those rights to each employee eligible to enroll, at or before the first chance to enroll. It explains that an employee may join mid-year within 30 days after losing other coverage, marrying, having a child, adopting or a placement for adoption; the Department of Labor publishes a model notice.

COBRA and Cal-COBRA by headcount

Federal COBRA applies to private-sector group health plans of employers that had at least 20 employees on more than half of their business days in the prior year, with part-time employees counted as fractions; some church-related plans are outside it. When an employee leaves, the election notice generally goes out within 14 days after the plan administrator learns of the qualifying event, or within 44 days of the loss of coverage where the employer is also the administrator.

Below that size, California’s Cal-COBRA law covers group plans of employers with 2 to 19 employees and can continue coverage for up to 36 months. For larger employers whose group policy was issued in California, Cal-COBRA can extend coverage after the 18 federal months to a combined total of up to 36.

Waiting periods and who must be offered coverage

A group health plan or insurer cannot make an otherwise eligible person wait more than 90 days for coverage to begin. Every calendar day counts, weekends and holidays included, and a plan may start coverage early when day 91 lands on a weekend or holiday. A genuine orientation period of up to one month, counted from the start date, may come before the 90 days.

The waiting-period rule does not require an employer to offer coverage to anyone, part-time workers included; it only limits how long eligible people wait. Below the ACA’s large-employer line of 50 full-time employees, counting equivalents, offering coverage is the employer’s choice, and health benefits for startups walks through the options for a young team.

ACA reporting and Section 125 plans

Form 1095-B is filed by whoever provides the minimum essential coverage. So for a small employer with a fully insured plan, the insurer handles the 1095-B. Form 1095-C belongs to applicable large employers, which file one for each full-time employee whether or not coverage was offered.

A Section 125 cafeteria plan lets employees pay their share of premiums from pre-tax pay. Its simplest common form is the premium-only plan, whose one choice is between cash pay and paying the employee’s premium share. Sole proprietors, partners and more-than-2% S corporation shareholders are treated as non-employees for cafeteria plan purposes, so they cannot pay their own premiums pre-tax through one, though the business can still sponsor a plan for its staff. The IRS rules here rest partly on proposed regulations, so set up a Section 125 plan with a tax professional. Founder health coverage before the first hire covers how owners handle their own premiums.

From the rules to an introduction

Choosing the coverage comes next. Our employee benefits for small businesses section explains the options, while insurance for startups sets out the commercial policies a growing company adds at each stage, such as workers’ compensation and employment practices liability. For those lines we request quotes, and the insurer decides terms after reviewing the business.

For health coverage, the quote form on this page is the starting point: list the states or countries your employees live in and the headcount in each, and we will hand the request to a benefits partner focused on international and remote-team health cover. That partner and the insurer set eligibility, plans and pricing.

A few useful answers

Common questions

Does a small employer with an insured plan have to file Form 5500?

Generally not, if the welfare plan had fewer than 100 participants at the start of the plan year and meets the DOL’s small-plan conditions in 29 CFR 2520.104-20. Plans subject to Form M-1 must file whatever their size.

How long can a new hire be made to wait for health coverage?

The limit is 90 days, counting every calendar day, weekends and holidays included. A genuine orientation period of up to one month may come first, and a plan may start coverage early when day 91 falls on a weekend or holiday.

Does COBRA apply to a company with fewer than 20 employees?

Federal COBRA generally starts at 20 employees, counted on more than half of the prior year’s business days. Below that, California’s Cal-COBRA law covers group plans of employers with 2 to 19 employees and can continue coverage for up to 36 months.

Who files Form 1095-B for a small fully insured plan?

The insurer. Form 1095-B is filed by whoever provides the minimum essential coverage, which for a fully insured plan is the health insurer.

Can business owners pay their premiums pre-tax through a Section 125 plan?

Sole proprietors, partners and more-than-2% S corporation shareholders are treated as non-employees for cafeteria plan purposes, so their own premiums stay outside the plan. The business can still offer a premium-only plan to its employees.

Small Employer Benefits Rules