Setting up benefits compliance for a business that is now its own employer
A divested business becomes its own plan sponsor with its own filings, notices and testing. The compliance setup should be built before the plans start.
Six compliance items for a new plan sponsor.
Plan Documents and SPDs
A new sponsor needs its own plan documents and summary plan descriptions that describe the actual plans.
ACA Status and Reporting
The new employer’s size and group status determine its obligations and the forms it files.
Annual Notices
Required notices go to employees on a schedule, and a new employer has to set up the calendar.
Form 5500 and Plan Filings
Plans that meet the size thresholds need annual filings, so ownership of the process should be assigned.
COBRA Procedures
Define who sends notices, who tracks events and who holds the records.
Cafeteria Plan and Account Setup
Premium-only plans, FSAs and HSAs need documents and election procedures in place.
Building the compliance calendar from day one.
A divested business starts with no calendar, and a missed date in the first year is easy. List every recurring obligation: annual notices, Form 5500 where it applies, ACA reporting if the business is large enough, COBRA procedures, nondiscrimination testing for cafeteria plans, and any state requirements. Assign each an owner and a date.
The plan documents come first. A divested business needs its own plan documents and summary plan descriptions that describe the actual plans, since the parent’s documents describe the parent’s. Having those in place before coverage starts avoids the common situation in which the plan runs without governing documents.
Compliance questions for newly independent employers.
Plain answers for HR, finance and deal teams.
Does a Divested Business Need New Plan Documents?
Usually. The parent’s documents describe its own plans, so the new sponsor needs documents for its own.
What Notices Are Required?
They depend on the plans offered. We build a calendar for the notices that apply.
When Are Filings Due?
Dates depend on plan year and plan type. We list them with owners for the first year.
Do We Need a Compliance Vendor?
Many small employers use one for COBRA, nondiscrimination testing and filings.
What About Accounts Like HSAs and FSAs?
Balances, elections and eligibility need a clear transfer or restart plan.
How Does Employer Size Matter?
Size affects which rules apply, including ACA reporting and COBRA coverage.
Who Is Responsible for Compliance?
The plan sponsor. We help organize the work, and counsel advises on legal questions.
When Should Setup Start?
Before the separation date, because many obligations begin as soon as the plan does.
Can You Act as Our Counsel?
No. We organize benefits compliance work and flag items for counsel.
What Is in the Setup Package?
A compliance setup checklist, a first-year calendar and a list of items for counsel.
Who is the plan administrator for the new business?
Whoever the new plan documents name, usually the new employer. Name them in the documents, and make sure they know the duties.
Which filings apply?
It depends on size and plan type: ACA reporting for large employers, Form 5500 for plans above the participant threshold and notices for all. Build the list from the plan inventory.
Ready? Upload your renewal, or talk it through with someone first. No cost, no obligation.
General information about a compliance setup, not legal or tax advice. Plan-specific questions belong with your counsel and tax advisor, and we will bring them in.
Related reading on setting up compliance.
Newly Independent Employer Guide
The page this belongs to.
Deal Topics Hub
The full section.
Benefits Glossary
Plain definitions for plan terms.
Starting compliance from scratch? Send us the plans.
We’ll tell you whether it looks competitive, where we see opportunity, and the five questions we’d put to your carrier. No cost, and no obligation to move anything.
The renewal letter
Your current plan summary
Contribution split by tier
Enrolled counts by tier
Four documents, two more if your group is 50 or more. Nothing else; every extra one is a reason to postpone.
An independent employee benefits consulting firm. We look at the entire benefits program — cost, plan performance, risk and administration.
Switch to CFH. Unhappy with your broker? Your employees won’t notice. You will. →