As the year wraps up, Colorado business owners must ensure their employee health benefits comply with federal and state requirements.
This blog post is a labor law and employee benefits compliance checklist for Colorado business owners, employers, and HR professionals. It will cover compliance basics, including key documents and deadlines for ACA, ERISA, health savings accounts, and even some Colorado-specific tax credits.
Nailing these important compliance tasks will help you and your business avoid penalties while maximizing the value of your employee benefits.
Affordable Care Act (ACA) Compliance
First, you need to know whether you are an Applicable Large Employer or ALE.
The general rule is this: The Affordable Care Act (ACA) requires businesses with 50+ full-time employees (Applicable Large Employers, or ALEs) to meet specific standards:
Employer Mandate
ALEs must offer minimum essential coverage (MEC) to at least 95% of your full-time employees and their dependents.
If you don’t offer this coverage and your employee buys their own insurance plan and receives a subsidy tax credit under the Affordable Care Act, you as their employer may have to pay a shared responsibility penalty.
This penalty can amount to thousands of dollars per employee who receives a subsidy. So it’s something you want to be very aware of.
At ColoHealth, we have strategies for ALEs that can potentially neutralize the shared responsibility penalty, provide excellent protection to employees and their families, and still save up to half of what providing full-fledged traditional health insurance benefits would cost.
For details, contact one of our expert Personal Benefits Managers for a free consultation and analysis.
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Affordability Standard
For 2025, group health plan costs must not exceed 9.02% of an employee’s household income. Check that your group health insurance coverage remains within this threshold.
IRS Reporting Deadlines (Forms 1094-C and 1095-C)
Employers must file IRS Forms 1094-C and 1095-C and furnish copies to employees not later than January 31st.
Failure to comply with ACA requirements can lead to substantial penalties, so it’s crucial to complete these checks well before the deadline.
Not an ALE?
If you’re not an applicable large employer under the ACA, you aren’t legally required to offer a qualifying health insurance plan to your employees at all.
But if you want to attract and retain the employees you need to remain competitive, offering a quality health plan is a must. The best workers have options, and if you aren’t offering a quality set of health benefits, they won’t stay long.
Fortunately, small employers have options, too, including:
- Sponsoring a traditional group health insurance plan
- Offering a low-cost health sharing plan
- Starting a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA)
- Offering a Direct Primary Care benefit
- Enrolling employees in the 1Complete Solution plan
ERISA Compliance
The Employee Retirement Income Security Act (ERISA) applies to most employer-sponsored health benefit plans, regardless of size.
If you sponsor a group health insurance plan or pension plan (including 401(k) and 403(b) plans), you have some important compliance tasks under ERISA.
Before year-end, be sure to take care of the following:
Update and Distribute Your Summary Plan Description (SPD)
Ensure an up-to-date Summary Plan Description is distributed to eligible employees.
File Your Annual Form 5500
If your plan covers 100 or more participants, you must file Form 5500 with the Department of Labor, on the last day of the seventh month after your plan year ends.
Update Any Plan Amendments
Update and file your SPD and summary of material modifications (SMM) with the DOL if you’ve modified your 2025 health plan.
ERISA violations can lead to penalties and lawsuits, so thorough year-end reviews are a must.
Health Savings Account Compliance Requirements
If you make health savings account contributions on behalf of your employees, or if employees make pre-tax HSA contributions via payroll deduction, you have some important filing requirements.
Complete 2024 Contributions
The first order of business is to ensure all your employer HSA contributions you plan to make on your employees’ behalf are completed by the end of the year.
Be sure your combined employee/employer HSA contributions adhere to the HSA contribution limits for 2024, and also for 2025.
For 2024, individual HDHP plan members can contribute up to $4,150 to an HSA. That cap applies to both employee and employer contributions combined. For family plans, the combined limit is $8,300.
Employees have until April 15th to make their HSA contributions for 2024. But employers need to complete their contributions by year-end to deduct contributions in the current tax year.
Again, if you offer a high-deductible health plan (HDHP) that qualifies employees for HSA contributions, ensure any employer contributions are made by December 31.
W-2 Requirements
Report employer contributions to HSAs on employees’ W-2s.
Employers should report the total value of health care coverage in Box 12 of employees’ W-2s with Code DD.
Do not include employee contributions in wages, tips, and income. They are pre-tax. Employers, however, must report all employee and employer contributions to employee HSAs in Box 11 with Code W.
More complete information on W-2 requirements for all other health and welfare employee benefits is located here.
LEARN MORE: Understanding Your HSA Tax Forms
Claim the Small Business Healthcare Tax Credit
Colorado small businesses offering employee health insurance may qualify for federal tax credits in 2025.
Eligibility
Businesses with fewer than 25 full-time equivalent employees and an average wage under $60,000 (adjusted for inflation) may qualify. A minimum 50% contribution to each employee’s health insurance premium is also required.
Two-Year Limit
The credit is available for two consecutive years, so if you claimed it for the first time in 2024, you can claim it again this year.
Start a Health Plan Before Year-End
If you don’t offer health insurance, consider starting a plan by December 31 to qualify for the credit.
This credit can lower health coverage costs, helping Colorado businesses stay competitive while offering essential employee benefits.
QSEHRA Compliance
Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) allow small businesses (<50 employees) without group health plans to reimburse workers tax-free for individual health insurance and medical costs.
Annual Limits
For 2025, the maximum reimbursement limit is $5,850 for individuals and $11,800 for family coverage. Review your reimbursement amounts to ensure compliance with these limits.
QSEHRA Notice
Employers must inform employees of available funds and potential impact on ACA subsidies.
Documenting Expenses
Employers must require proof of insurance or receipts for medical expenses before reimbursing employees.
QSEHRAs offer flexibility, but following these requirements is essential to stay compliant and avoid IRS penalties.
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Year-End Health Benefits Compliance Checklist Summary
- Update plan documents
- Notify employees of changes
- Review plan offerings for next year
- Consider adding an HSA option
Get Help with HSA Plans
Health plan compliance can be tricky.
Consider contacting a Personal Benefits Manager to learn how offering an HSA plan can benefit your employees and enhance your business’s appeal in Colorado’s job market.
Conducting a year-end compliance check ensures your business adheres to federal and Colorado laws, giving you confidence as you approach 2025. By taking these proactive steps, you can avoid costly mistakes, maintain employee satisfaction, and support your business’s continued success.
For Further Reading
The mission of Colohealth resonates deeply with Mark Smith, as it aligns perfectly with his personal beliefs and values…
