Legally Required Employee Benefits

admin30 March 2023Last Update :

Navigating Legally Required Employee Benefits: What Employers Need to Know

Employee benefits are an integral part of the employer-employee relationship, contributing to job satisfaction, retention, and overall well-being. While many benefits are offered voluntarily by employers to attract and retain top talent, there are also legally required employee benefits that employers must provide to ensure fair treatment in the workplace. In this comprehensive guide, we’ll delve into the world of legally required employee benefits, covering health insurance, retirement plans, workers’ compensation, and family and medical leave.

1. Health Insurance Benefits

Health Insurance Coverage Under the Affordable Care Act (ACA)

Health insurance is one of the most critical legally required employee benefits, and it’s governed by the Affordable Care Act (ACA). Here’s what you need to know:

  • Employer Size Matters: Employers with 50 or more full-time equivalent employees are mandated to offer affordable health insurance coverage to their employees.
  • Essential Health Benefits: These plans must cover essential health benefits such as hospitalization, prescription drugs, and preventative care.
  • Penalties for Non-Compliance: Failure to offer health insurance coverage can result in substantial penalties, so compliance is essential.

Notices and Wellness Programs

In addition to providing health insurance coverage, employers must also adhere to specific notice requirements:

  • Summary of Benefits and Coverage (SBC): Employers must furnish an SBC to employees who enroll in their health insurance plan, outlining key details about benefits and costs.
  • COBRA Continuation Coverage: Employees who lose health insurance coverage due to qualifying events, like job termination, must be notified of their eligibility for COBRA continuation coverage.
  • Wellness Programs: The ACA allows employers to incentivize employee participation in wellness programs, but these incentives cannot exceed 30% of the total cost of health insurance coverage.

Tax Benefits and Deductions

Employers offering health insurance can benefit from tax deductions:

  • Premium Contributions: Employers may deduct the cost of their contributions to employee health insurance premiums as a business expense.

2. Retirement Benefits

Understanding Retirement Benefits and ERISA

While federal law doesn’t require employers to offer retirement benefits, those who choose to do so must comply with the Employee Retirement Income Security Act (ERISA). Here’s a closer look:

  • Summary Plan Description (SPD): Employers must provide employees with an SPD outlining key features of the retirement plan, such as eligibility requirements and contribution limits.
  • Age Discrimination in Employment Act (ADEA): Employers are prohibited from discriminating against employees based on age, including when it comes to retirement benefits.

State Laws and Retirement Benefits

Employers should also be aware of state laws related to retirement benefits, as some states have their own requirements and protections for employees participating in retirement plans.

Retirement Plan Types

Employers can choose from various retirement plan options, such as:

  • Pensions: Traditional pensions provide employees with guaranteed income upon retirement.
  • 401(k) Plans: These allow employees to contribute a portion of their salary to a retirement account, often with employer matching.

3. Workers’ Compensation Benefits

Mandatory Workers’ Compensation Insurance

Workers’ compensation insurance is mandatory in most states and serves as a safety net for employees who suffer work-related injuries or illnesses. Key points to consider:

  • Employer Responsibility: Employers must pay the premiums for workers’ compensation insurance.
  • Coverage Details: The insurance covers medical expenses, lost wages, and vocational rehabilitation for injured employees.
  • No-Fault System: Workers’ compensation is a no-fault system, meaning that employees can receive benefits regardless of fault for the injury.

Preventing Legal Consequences

Failure to provide workers’ compensation insurance can result in fines and legal action. Employers who do not offer this coverage may also be liable for the full cost of an employee’s medical expenses and lost wages.

4. Family and Medical Leave Benefits

The Family and Medical Leave Act (FMLA)

FMLA requires covered employers to provide eligible employees with up to 12 weeks of unpaid leave per year for specific family and medical reasons. Key details include:

  • Eligibility: To be eligible for FMLA leave, employees must have worked for the employer for at least 12 months and met specific hourly requirements.
  • Continuation of Health Insurance: Employers must maintain employees’ health insurance during FMLA leave.
  • Restoration of Position: Upon return from FMLA leave, employees must be reinstated to their original or equivalent positions.

Paid Family Leave Programs

In addition to FMLA, some states offer paid family leave programs. For example, California’s Paid Family Leave program provides partial wage replacement for employees who need time off to care for family members.

Americans with Disabilities Act (ADA)

The ADA requires employers to provide reasonable accommodations to employees with disabilities, including leave as a reasonable accommodation.


Legally required employee benefits are fundamental to ensuring fair treatment and well-being in the workplace. Employers must understand their obligations under these laws, including the ACA’s requirements for health insurance coverage, ERISA’s standards for retirement benefits, and workers’ compensation laws to protect injured employees. Familiarity with FMLA and any applicable state laws, as well as compliance with the ADA, is also crucial. By offering these benefits and adhering to legal requirements, employers can attract and retain top talent while avoiding costly legal issues and penalties. Employee benefits are more than just legal obligations; they are a testament to an employer’s commitment to the welfare of their workforce.

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