2025 Open Enrollment Checklist
August 2, 2024
2025 Open Enrollment Checklist

To get ready for open enrollment, employers who sponsor group health plans should be aware of compliance changes affecting the design and administration of their health plans for plan years beginning on or after Jan. 1, 2025. These changes include limits that are adjusted for inflation each year, such as the Affordable Care Act’s (ACA) affordability percentage and cost-sharing limits for high deductible health plans (HDHPs). Employers should review their health plan’s design to confirm that it has been updated, as necessary, for these changes.


In addition, any changes to a health plan’s benefits for the 2025 plan year should be communicated to plan participants through an updated summary plan description (SPD) or a summary of material modifications (SMM).


Health plan sponsors should also confirm that their open enrollment materials contain certain required participant notices, such as the summary of benefits and coverage (SBC), when applicable. Some participant notices must also be provided annually or upon initial enrollment. To minimize costs and streamline administration, employers should consider including these notices in their open enrollment materials.


Plan Design Changes

ACA Affordability Standard

The ACA requires ALEs to offer affordable, minimum-value health coverage to their full-time employees (and dependents) or risk paying a penalty to the IRS. This employer mandate is also known as the “pay-or-play” rules. An ALE is an employer with at least 50 full-time employees, including full-time equivalent employees, during the preceding calendar year.


An ALE’s health coverage is considered affordable if the employee’s required contribution for the lowest cost self-only coverage that provides minimum value does not exceed 9.5% (as adjusted) of the employee’s household income for the taxable year. For plan years beginning in 2024, the adjusted affordability percentage is 8.39%.


The affordability percentage for plan years beginning on or after Jan. 1, 2025, has not been released yet. Going forward, ALEs should take the following steps:


  • Monitor future developments for the IRS’ release of the affordability percentage for 2025; and
  • Once the affordability percentage is released, confirm that at least one of the health plans offered to full-time employees satisfies the ACA’s affordability standard. Because an employer generally will not know an employee’s household income, the IRS has provided three optional safe harbors that ALEs may use to determine affordability based on information that is available to them: the Form W-2 safe harbor, the rate-of-pay safe harbor and the federal poverty line safe harbor.


Out-of-Pocket Maximum Limits

Non-grandfathered health plans and health insurance issuers are subject to limits on cost sharing for essential health benefits (EHB). EHBs reflect the scope of benefits covered by a typical employer plan and must include items and services in 10 general categories, including emergency services, hospitalization, ambulatory patient services, prescription drugs, pregnancy, maternity and newborn care, mental health and substance use disorder services, rehabilitative and habilitative services, laboratory services, preventive and wellness services and chronic disease management, and pediatric services.


The annual limits on total enrollee cost sharing for EHB for plan years beginning on or after Jan. 1, 2025, are $9,200 for self-only coverage and $18,400 for family coverage. With this in mind, employers should take the following steps:


  • Review the out-of-pocket maximum limits for the health plan to ensure they comply with the ACA’s limits for the 2025 plan year; and
  • Keep in mind that the out-of-pocket maximum limits for HDHPs compatible with HSAs must be lower than the ACA’s limits. For the 2025 plan year, the out-of-pocket maximum limits for HDHPs are $8,300 for self-only coverage and $16,600 for family coverage.


Preventive Care Benefits

The ACA requires non-grandfathered health plans and issuers to cover a set of recommended preventive services without imposing cost-sharing requirements, such as deductibles, copayments or coinsurance, when the services are provided by in-network providers. The recommended preventive care services covered by these requirements are:


  • Evidence-based items or services with an A or B rating in recommendations of the U.S. Preventive Services Task Force;
  • Immunizations recommended by the Advisory Committee on Immunization Practices for routine use in children, adolescents and adults;
  • Evidence-informed preventive care and screenings in guidelines supported by the Health Resources and Services Administration (HRSA) for infants, children and adolescents; and
  • Other evidence-informed preventive care and screenings in HRSA-supported guidelines for women.


Health plans and issuers are required to adjust their first-dollar coverage of preventive care services based on the latest preventive care recommendations. In general, coverage must be provided for a newly recommended preventive health service or item for plan years beginning on or after the one-year anniversary of when the recommendation was issued. For example, health plans and issuers must cover screenings for anxiety disorders in adults, including pregnant and postpartum patients, effective for plan years beginning on or after June 30, 2024 (e.g., the plan year beginning Jan. 1, 2025, for calendar-year plans). More information on the recommended preventive care services is available at www.HealthCare.gov.


Before the beginning of the 2025 plan year, employers should take the following step:


  • Confirm the health plan covers the latest recommended preventive care services without imposing any cost sharing when the care is provided by in-network providers.


Health FSA Contributions

The ACA imposes a dollar limit on employees’ pre-tax contributions to a health FSA. This limit is indexed each year for cost-of-living adjustments. An employer may set their own dollar limit on employees’ contributions to a health FSA as long as the employer’s limit does not exceed the ACA’s maximum limit in effect for the plan year. For plan years beginning in 2024, the health FSA limit is $3,200. The IRS has not yet released the health FSA limit for plan years beginning in 2025. Moving forward, employers with health FSAs should take these steps:


  • Monitor future developments for the release of the health FSA limit for 2025;
  • Once the IRS releases the health FSA limit, confirm that employees will not be allowed to make pre-tax contributions in excess of the limit for the 2025 plan year; and
  • Communicate the health FSA limit to employees as part of the open enrollment process.


HDHP and HSA Limits

The IRS limits for HSA contributions, HDHP minimum deductibles and HDHP maximum out-of-pocket expenses all increase for 2025. The HSA contribution limits will increase effective Jan. 1, 2025, while the HDHP cost-sharing limits will increase effective for plan years beginning on or after Jan. 1, 2025. Looking ahead, employers should take these steps:



  • Check whether HDHP cost-sharing limits need to be adjusted for the 2025 limits; and
  • Communicate HSA contribution limits for 2025 to employees as part of the enrollment process.


The following table contains the HDHP and HSA limits for 2025 compared to 2024. It also includes the catch-up contribution limit that applies to HSA-eligible individuals age 55 and older, which is not adjusted for inflation and stays the same from year to year.

HDHPs: Expiration of Design Options

To be eligible for HSA contributions for a month, an individual must be covered under an HDHP as of the first day of the month and have no other impermissible coverage. In general, except for preventive care benefits, no benefits can be paid by an HDHP until the minimum annual deductible has been satisfied. However, there are a few narrow exceptions to the minimum deductible requirement, including the following exceptions that are expiring:


  • For plan years ending after Dec. 31, 2024, an HDHP is no longer permitted to provide benefits for COVID-19 testing and treatment without a deductible (or with a deductible below the minimum deductible for an HDHP); and
  • For plan years beginning on or after Jan. 1, 2025, an HDHP is no longer permitted to provide benefits for telehealth or other remote care services before plan deductibles have been met.


Due to these changes, employers with HDHPs should take these steps for plan years beginning in 2025:


  • Confirm that HDHPs will not pay benefits for COVID-19 testing and treatment before the annual minimum deductible has been met;
  • Confirm that HDHPs will not pay benefits for telehealth or other remote care services (except for preventive care benefits) before the annual minimum deductible has been met; and
  • Notify plan participants of any changes for the 2025 plan year regarding COVID-19 testing and treatment and telehealth services through an updated SPD or SMM.


EBHRA Limit

An excepted benefit health reimbursement arrangement (EBHRA) is an employer-funded health care account that reimburses employees for their eligible medical expenses on a tax-free basis. Employers can use EBHRAs to supplement their traditional group health plan coverage and help employees with their out-of-pocket medical expenses, including deductible, copayment and coinsurance amounts. Employers of all sizes may offer EBHRAs. Although an employer must offer a traditional group health plan, employees are not required to enroll in the employer’s group coverage (or any other type of coverage) to be eligible for the EBHRA.


Only employers can contribute to HRAs, including EBHRAs. EBHRAs are subject to a maximum amount that may be made newly available for the plan year. This maximum amount is adjusted annually for inflation. For 2024 plan years, the contribution limit is $2,100. This limit increases to $2,150 for plan years beginning in 2025.


Employers that sponsor EBHRAs should take the following steps:


  • Decide how much will be contributed to the EBHRA for eligible employees for the 2025 plan year, up to a maximum of $2,150; and
  • Communicate the EHBRA’s annual benefit amount to employees as part of the open enrollment process.


Mental Health Parity – Required Comparative Analysis for NQTLs

The Mental Health Parity and Addiction Equity Act (MHPAEA) requires parity between a group health plan’s medical/surgical benefits and its mental health or substance use disorder (MH/SUD) benefits. These parity requirements apply to financial requirements and treatment limits for MH/SUD benefits. In addition, any nonquantitative treatment limitations (NQTLs) placed on MH/SUD benefits must comply with MHPAEA’s parity requirements. For example, NQTLs include prior authorization, step therapy protocols, network adequacy and medical necessity criteria.


MHPAEA requires health plans and issuers to conduct comparative analyses of the NQTLs used for medical/surgical benefits compared to MH/SUD benefits. This analysis must contain a detailed, written and reasoned explanation of the specific plan terms and practices at issue and include the basis for the plan’s or issuer’s conclusion that the NQTLs comply with MHPAEA. Plans and issuers must make their comparative analyses available to specific federal agencies or applicable state authorities upon request. In recent years, the U.S. Department of Labor (DOL) has made MHPAEA compliance a top enforcement priority, with a primary focus being MHPAEA’s parity requirements for NQTLs. Considering this information, employers should take the following step:


  • Reach out to health plan issuers (or third-party administrators) to confirm that comparative analyses of NQTLs will be updated, if necessary, for the plan year beginning in 2025.


Prescription Drug Benefits – Creditable Coverage Determination

The Inflation Reduction Act of 2022 (IRA) includes several cost-reduction provisions affecting Medicare Part D plans, which may impact the creditable coverage status of employer-sponsored prescription drug coverage beginning in 2025. For example, effective for 2025, Medicare enrollees’ out-of-pocket costs for prescription drugs will be capped at $2,000.


Employers that provide prescription drug coverage to individuals who are eligible for Medicare Part D must inform these individuals and the Centers for Medicare and Medicaid Services (CMS) whether their prescription drug coverage is creditable, meaning that the employer’s prescription drug coverage is at least as good as Medicare Part D coverage. These disclosures must be provided on an annual basis and at certain other designated times, including when there is a change to a prescription drug benefit’s creditable coverage status.


Previously, CMS stated that one of the methods for determining whether coverage is creditable (the “simplified determination” method) would no longer be valid as of calendar year 2025, given the significant changes made to Medicare Part D by the IRA. However, CMS subsequently decided that it will continue to permit the use of the simplified determination methodology, without modification, for calendar year 2025 for group health plan sponsors who are not applying for the retiree drug subsidy.


Due to these developments, employers should take the following steps:


  • Confirm whether their health plans’ prescription drug coverage for 2025 is creditable or noncreditable as soon as possible to prepare to send the appropriate Medicare Part D disclosure notices; and
  • Continue to utilize the simplified determination method for determining whether prescription drug coverage is creditable for 2025, if applicable.


Open Enrollment Notices

Employers who sponsor group health plans should provide certain benefits notices in connection with their plans’ open enrollment periods. Some of these notices must be provided at open enrollment time, such as the SBC. Other notices, such as the WHCRA notice, must be distributed annually. Although these annual notices may be provided at different times throughout the year, employers often choose to include them in their open enrollment materials for administrative convenience.


In addition, employers should review their open enrollment materials to confirm that they accurately reflect the terms and cost of coverage. In general, any plan design changes for 2025 should be communicated to plan participants either through an updated SPD or an SMM.


Summary of Benefits and Coverage

The ACA requires health plans and health insurance issuers to provide an SBC to applicants and enrollees each year at open enrollment or renewal time. Federal agencies have provided a template for the SBC, which health plans and issuers are required to use. To comply with the SBC requirements, employers should include an updated SBC with open enrollment materials.


Take note that the plan administrator is responsible for providing the SBC for self-funded plans. For insured plans, the issuer usually prepares the SBC. If the issuer prepares the SBC, an employer is not required to also prepare an SBC for the health plan, although they may need to distribute the SBC prepared by the issuer.


Medicare Part D Notices

Group health plan sponsors must provide a notice of creditable or noncreditable prescription drug coverage to Medicare Part D-eligible individuals covered by, or who apply for, prescription drug coverage under the health plan. This creditable coverage notice alerts individuals about whether their prescription drug coverage is at least as good as the Medicare Part D coverage. The notice generally must be provided at various times, including when an individual enrolls in the plan and each year before Oct. 15 (when the Medicare annual open enrollment period begins). Model notices are available on the Centers for Medicare and Medicaid Services’ website.


Annual CHIP Notices

Group health plans covering residents in a state that provides a premium subsidy to low-income children and their families to help pay for employer-sponsored coverage must send an annual CHIP notice about the available assistance to all employees residing in that state. The DOL has provided a model notice. Employers should confirm they are using the most recent model notice, as the DOL updates it regularly.


Initial COBRA Notices

COBRA applies to employers with 20 or more employees who sponsor group health plans. Group health plan administrators must provide an initial COBRA notice to new participants and certain dependents within 90 days after plan coverage begins. The initial COBRA notice may be incorporated into the plan’s SPD. A model initial COBRA notice is available from the DOL.


SPDs

Plan administrators must provide an SPD to new participants within 90 days after plan coverage begins. Any changes made to the plan should be reflected in an updated SPD booklet or described to participants through an SMM. Also, an updated SPD must be furnished every five years if changes are made to SPD information or the plan is amended. Otherwise, a new SPD must be provided every 10 years.


Notices of Patient Protections

Under the ACA, group health plans and issuers that require the designation of a participating primary care provider must permit each participant, beneficiary and enrollee to designate any available participating primary care provider (including a pediatrician for children). Additionally, plans and issuers that provide obstetrical/gynecological care and require a designation of a participating primary care provider may not require preauthorization or referral for such care. If a health plan requires participants to designate a participating primary care provider, the plan or issuer must provide a notice of these patient protections whenever the SPD or similar description of benefits is provided to a participant. If an employer’s plan is subject to this notice requirement, they should confirm that it is included in the plan’s open enrollment materials. This notice may be included in the plan’s SPD. Model language is available from the DOL.


Grandfathered Plan Notices

If an employer has a grandfathered plan, they should make sure to include information about the plan’s grandfathered status in plan materials describing the coverage under the plan, such as SPDs and open enrollment materials. Model language is available from the DOL.


Notices of HIPAA Special Enrollment Rights

At or before the time of enrollment, an employer’s group health plan must provide each eligible employee with a notice of their special enrollment rights under HIPAA. This notice may be included in the plan’s SPD.


HIPAA Privacy Notices

The HIPAA Privacy Rule requires covered entities (including group health plans and issuers) to provide a Notice of Privacy Practices (or Privacy Notice) to each individual who is the subject of protected health information (PHI). Health plans are required to send the Privacy Notice at certain times, including to new enrollees at the time of enrollment. Also, at least once every three years, health plans must either redistribute the Privacy Notice or notify participants that the Privacy Notice is available and explain how to obtain a copy.


Self-insured health plans must maintain and provide their own Privacy Notices. However, special rules apply for fully insured plans, where the health insurance issuer, not the plan itself, is primarily responsible for the Privacy Notice.


Special Rules for Fully Insured Plans

The sponsor of a fully insured health plan has limited responsibilities with respect to the Privacy Notice, including the following:


  • If the sponsor of a fully insured plan has access to PHI for plan administrative functions, they are required to maintain a Privacy Notice and provide the notice upon request; and
  • If the sponsor of a fully insured plan does not have access to PHI for plan administrative functions, they are not required to maintain or provide a Privacy Notice.


A plan sponsor’s access to enrollment information, summary health information and PHI that is released pursuant to a HIPAA authorization does not qualify as having access to PHI for plan administration purposes.


Model Privacy Notices are available through the U.S. Department of Health and Human Services.


WHCRA Notices

Plans and issuers must provide a notice of participants’ rights to mastectomy-related benefits under the WHCRA at the time of enrollment and on an annual basis. The DOL’s compliance assistance guide includes model language for this disclosure.


SARs

Plan administrators required to file Form 5500 must provide participants with a narrative summary of the information in Form 5500, called a summary annual report (SAR). Group health plans that are unfunded (that is, benefits are payable from the employer’s general assets and not through an insurance policy or trust) are not subject to the SAR requirement. The plan administrator generally must provide the SAR within nine months of the close of the plan year. If an extension of time to file Form 5500 is obtained, the plan administrator must furnish the SAR within two months after the close of the extension period. A model notice is available from the DOL.


Wellness Program Notices

Group health plans that include wellness programs may be required to provide certain notices regarding the program’s design. As a general rule, these notices should be provided when the wellness program is communicated to employees and before employees provide any health-related information or undergo medical examinations. These notices are required in the following situations:


  • HIPAA Wellness Program Notice—HIPAA imposes a notice requirement on health-contingent wellness programs offered under group health plans. Health-contingent wellness plans require individuals to satisfy standards related to health factors (e.g., not smoking) to obtain rewards. The notice must disclose the availability of a reasonable alternative standard to qualify for the reward (and, if applicable, the possibility of waiver of the otherwise applicable standard) in all plan materials describing the terms of a health-contingent wellness program. The DOL’s compliance assistance guide includes a model notice that can be used to satisfy this requirement.
  • Americans with Disabilities Act (ADA) Wellness Program Notice—Employers with 15 or more employees are subject to the ADA. Wellness programs that include health-related questions or medical exams must comply with the ADA’s requirements, including an employee notice requirement. Employers must give participating employees þ a notice that tells them what information will be collected as part of the wellness program, with whom it will be shared and for what purpose, as well as includes the limits on disclosure and the way information will be kept confidential. The U.S. Equal Employment Opportunity Commission has provided a sample notice to help employers comply with this ADA requirement.


ICHRA Notices

Employers may use individual coverage health reimbursement arrangements (ICHRAs) to reimburse their eligible employees for insurance policies purchased in the individual market or for Medicare premiums. Employers with ICHRAs must provide a notice to eligible participants about the ICHRA and its interaction with the ACA’s premium tax credit. In general, this notice must be provided at least 90 days before the beginning of each plan year. Employers may provide this notice at open enrollment time if it is at least 90 days prior to the beginning of the plan year. A model notice is available for employers to use to satisfy this notice requirement.


LINKS AND RESOURCES

Sign up for our newsletter.

How to Choose the Right Payroll Provider for Your Business

September 9, 2026
Choosing a payroll provider is an important business decision. Payroll touches nearly every employee, every pay period, and often connects with several other areas of your organization, including HR, benefits, timekeeping, retirement contributions, tax reporting and compliance. The right provider should do more than simply calculate wages and issue paychecks. It should help your organization operate more efficiently, reduce administrative burden, support accurate payroll processing and give your team confidence that the systems behind your workforce are working as they should. Whether you are evaluating payroll providers for the first time or reconsidering your current solution, here are several important factors to keep in mind. 1. Look Beyond the Payroll Software Technology matters, but software alone does not determine whether an employer has a good payroll experience. A strong payroll platform should make routine processes easier through features such as employee self-service, automated workflows, reporting, timekeeping integrations and access to payroll information. At the same time, employers should consider how well the technology is implemented, maintained and supported. Even a sophisticated system can create frustration if it is difficult to use, poorly configured or disconnected from the rest of the organization. When evaluating a provider, consider both the technology itself and the experience of using it day to day. 2. Understand What Support Will Actually Look Like Payroll questions are often time-sensitive. When an issue arises, employers need to know who they can contact and how quickly they can expect meaningful assistance. Before choosing a provider, ask how support is structured. Will your organization have a dedicated point of contact? Will you reach a general service queue? Who handles more complex payroll, tax or system questions? How are urgent issues escalated? The answers can tell you a great deal about what the relationship will feel like after implementation. Strong service should not begin and end with onboarding. It should continue throughout the relationship. 3. Ask How Implementation Is Handled A successful payroll experience starts with a strong implementation. Moving payroll systems can involve employee data, tax information, deductions, earning codes, direct deposit information, timekeeping rules, benefits elections and historical payroll records. If those details are not configured accurately from the beginning, problems can surface later. Ask prospective providers how they manage the transition. A thorough implementation process should include clear timelines, defined responsibilities, data review, testing and communication before your first live payroll. Employers should also understand who will oversee the implementation and whether that person remains involved through the transition. 4. Consider How Payroll Connects With the Rest of Your Business Payroll rarely operates in isolation. An employee may change benefit coverage, receive a raise, become eligible for retirement contributions, update a tax election or change work locations. Each of those changes can affect payroll. When systems are disconnected, employers may need to enter the same information in multiple places, creating more manual work and more opportunities for inconsistencies. A modern payroll solution should work effectively with the other systems and processes supporting your workforce. Depending on your organization, that may include: HR and employee records Time and attendance Benefits administration Retirement contributions Recruiting and onboarding Performance management Reporting and compliance The more connected these processes are, the easier it can be to maintain accurate information across the organization. 5. Evaluate Reporting and Visibility Payroll data can provide valuable insight into labor costs, overtime, taxes, deductions and workforce trends. Employers should be able to access that information without spending excessive time building reports manually or requesting information from their provider. Ask what standard reporting is available, how customizable reports are and whether managers can access the information they need. Good reporting should make payroll data easier to understand and more useful for business decision-making. 6. Consider Compliance Support Payroll is closely tied to tax requirements, wage and hour rules, reporting obligations and other compliance responsibilities. While employers ultimately remain responsible for their own compliance, the right payroll provider should have processes and expertise in place to help support accurate payroll administration. Ask how tax filings are handled, how regulatory changes are communicated and what resources are available when questions arise. It is also important to understand where the payroll provider's responsibilities end and where the employer's responsibilities begin. Clear expectations can help prevent confusion later. 7. Make Sure the Solution Can Grow With You The payroll system that works for your business today should also be able to support where your organization is heading. Growth can introduce more employees, additional locations, new states, different pay structures and more complex HR or benefits needs. When evaluating providers, think beyond your current headcount. Ask whether the platform and service model can accommodate additional complexity without requiring your team to rebuild processes or change providers again. A solution that can scale with your organization may provide greater consistency over time. 8. Pay Attention to the Overall Relationship Price will always be an important consideration, but it should not be the only one. A lower-cost option can become expensive if your team spends significant time correcting errors, navigating manual processes or trying to reach support. Consider the overall value of the relationship. Does the provider understand your business? Are expectations clear? Do they communicate proactively? Do they have the expertise to support the areas that matter most to your organization? Payroll is an ongoing operational function, so the quality of the partnership can matter just as much as the technology. Questions to Ask Before Choosing a Payroll Provider As you compare options, consider asking: Who will support our account after implementation? What does the implementation process look like? How does your system integrate with HR, benefits and timekeeping? How are payroll tax filings handled? What reporting capabilities are available? How are system or compliance updates communicated? What happens when we need urgent support? Can the platform support additional locations, states or employees as we grow? What services are included, and which require additional fees? How much manual work will remain for our internal team? These questions can help employers look beyond a software demonstration and better understand what the ongoing experience will actually be like. Choosing the Right Fit There is no single payroll provider that is right for every business. The best fit depends on your organization’s size, complexity, internal resources, growth plans and the level of support your team needs. The goal should be to find a provider that combines dependable technology with knowledgeable service , a thoughtful implementation process and systems that work together effectively . When payroll is supported by the right technology, people and processes, it can become a much more efficient part of running your business rather than another administrative burden.

Is Your 401(k) Plan Working for Your Employees? Questions Employers Should Ask

August 31, 2026
Offering a 401(k) plan is an important part of a competitive benefits package, but simply having a retirement plan in place does not necessarily mean it is delivering the value you intended. A strong retirement plan should support both sides of the relationship. For employees, it should make saving for the future accessible, understandable, and manageable. For employers, it should support broader goals around recruitment, retention, financial wellness, and overall employee experience. Retirement plan participation has made significant progress in recent years. Vanguard's 2026 How America Saves report found that participation among eligible employees reached a record 86%, up from 65% when the study began 25 years ago. Vanguard points to improvements in plan design, including automatic enrollment, stronger default contribution rates, and employer support, as important drivers of that progress. For employers, that raises a useful question: Is your current retirement plan doing everything it could for your workforce? Here are seven areas worth reviewing. 1. Are Employees Actually Participating? Start with one of the simplest measures: how many eligible employees are using the plan? A retirement benefit can be well-designed on paper but have limited impact if a meaningful portion of the workforce never enrolls. Look beyond the overall participation rate and consider whether certain groups are participating less than others. New hires, younger employees, lower-paid employees, or particular departments may have different engagement levels. Low participation does not always mean employees are uninterested. Sometimes the issue is simply that enrollment feels complicated, information is unclear, or employees continue putting off a decision. 2. Are Employees Saving Enough to Make Participation Meaningful? Participation alone does not tell the entire story. An employee contributing a very small percentage of pay is technically participating, but may still be far from building the savings they need for retirement. Employers can review broader plan trends such as average contribution rates, how many employees are contributing enough to receive the full employer match, and whether participants tend to increase their savings over time. The goal is not for employers to determine how much any individual employee should save. Rather, it is to understand whether the plan's structure and communication are encouraging employees to take meaningful steps toward long-term financial security. 3. Is Your Employer Match Accomplishing What You Intended? Employer contributions can be one of the most visible and valuable parts of a retirement benefit. But it is worth periodically asking why your organization offers a match and whether the current structure still supports that objective. Is the goal to encourage higher savings? Strengthen recruitment and retention? Provide a more competitive benefits package? Support employee financial wellness? Employees should also understand how the match works. If participants are regularly contributing below the level required to receive the full employer contribution, that may indicate an opportunity for clearer education or communication. 4. Does Your Plan Make Saving Easy? One of the biggest changes in retirement planning over the past several decades has been the shift toward plan designs that make saving easier. Vanguard's 2026 research found that nearly two-thirds of plans with automatic enrollment now use a default contribution rate of at least 4%, while approximately one-third default participants at 6%. Features such as automatic enrollment and automatic contribution increases can help reduce the need for employees to make every decision on their own. Employers may also want to consider the everyday participant experience: Is enrollment straightforward? Is it easy to change a contribution rate? Can employees access their accounts without unnecessary friction? Are payroll deductions processed consistently? Can participants easily update beneficiaries or review plan information? Small barriers can have an outsized impact on whether employees actively engage with the benefit. 5. Do Employees Understand Their Retirement Benefit? Employees cannot fully value a benefit they do not understand. Retirement plans can involve unfamiliar terminology around contribution types, employer matches, vesting, investment options, distributions, and other plan features. For employees who are new to retirement saving, that information can quickly become overwhelming. Consider whether employees clearly understand: How to enroll How much the employer contributes, if applicable How the employer match works How to change their contribution Where to find plan information Who to contact when they have questions Retirement education also should not necessarily end after onboarding. Employees' questions and priorities change as their careers, compensation, and personal circumstances evolve. Clear, ongoing communication can help employees make more informed decisions and better appreciate the benefit their employer is providing. 6. Does the Plan Support Employees at Different Career Stages? A workforce rarely has one set of retirement needs. An employee just beginning their career may need help understanding why starting early matters. A mid-career employee may be balancing retirement savings with housing, childcare, or other financial priorities. Someone approaching retirement may have entirely different questions about contribution opportunities, account management, and the transition out of the workforce. A strong retirement benefit should be able to support employees across those different stages. That may include thoughtful plan design, educational resources, appropriate investment options, access to professional guidance, and communication that goes beyond a one-size-fits-all approach. 7. Does the Plan Still Fit Your Business? Retirement plans should evolve alongside the organizations that sponsor them. Your workforce may be larger than it was when the plan was established. Your recruiting strategy may have changed. Employees may now work across multiple states. Your internal HR or payroll team may have different capacity. Your compensation structure or benefits philosophy may have evolved. Those changes can all be reasons to revisit the current retirement plan. For some employers, an existing traditional 401(k) may remain the best fit. Others may benefit from changes to plan design, investment support, administrative structure, or a different retirement solution altogether, such as a Pooled Employer Plan (PEP) . The goal is not to change a retirement plan simply for the sake of changing it. It is to periodically confirm that the plan still aligns with the needs of both the organization and its employees. A Retirement Plan Should Do More Than Exist A 401(k) plan is more than an administrative requirement or another line on a benefits summary. When structured thoughtfully, it can become a meaningful part of the employee experience and an important tool for attracting, retaining, and supporting a workforce. Employers should periodically look beyond whether the plan is functioning and ask a bigger question: Is it producing the experience and outcomes we want for our people and our business? That review may include participation, savings behavior, employer contributions, employee education, plan design, investment support, and whether the overall structure still fits the organization. At Simco , we help employers evaluate retirement solutions based on their individual goals, workforce, and business needs. From traditional retirement plans to options such as the Simco PEP, our approach is focused on helping employers understand their choices and determine which structure makes the most sense for their organization. If it has been a while since your retirement plan was evaluated beyond its day-to-day administration, now may be a good time to take a closer look.

Hiring an Employee in Another State: Employer Compliance Guide

August 28, 2026
Hiring an employee outside your home state can be a great way to expand your talent pool, support remote work, or grow into new markets. But before extending an offer, employers should understand that hiring someone in another state, or another country, can affect much more than payroll. The rules that apply to an employee often depend on where the employee actually performs their work , not simply where the employer is headquartered. That means one out-of-state hire can potentially create new requirements involving payroll taxes, employee benefits, workers' compensation, HR policies, retirement plans, business insurance, and more. Not every consideration below will apply to every employee. Still, reviewing these areas early can help employers avoid last-minute complications after someone has already started working. 1. Payroll and Tax Registration Payroll is often one of the first areas affected when an employee begins working in a new state. Employers may need to register for state income tax withholding and unemployment insurance accounts before processing payroll for the employee. Depending on the employee's location, local payroll taxes may also apply. Your payroll system may need to be updated to account for: State-specific withholding requirements State unemployment taxes Local payroll taxes Applicable state or local wage rules Additional reporting requirements Employers should also be aware that having an employee working in another state may create additional business tax obligations, sometimes referred to as nexus . The specific impact depends on the states involved and the circumstances of the employment relationship, so payroll registration and tax implications should be evaluated before the employee's first payroll. If the employee will be working outside the United States, the process can become considerably more complex. Foreign payroll registration, country-specific tax reporting, and other employment-related obligations may need to be addressed. 2. Human Resources and Employment Law A common misconception is that an employer only needs to follow the employment laws of the state where the company is headquartered. In many situations, employment requirements are based on where the employee works . An employee working remotely from another state may therefore be subject to different rules involving: Minimum wage and overtime Meal and rest periods Paid sick leave Paid family or medical leave Expense reimbursement Final paycheck timing Required workplace notices Wage statements Employee classifications Your existing employee handbook may also need to be reviewed. A policy that works for employees in one state may not fully address requirements in another. Employers with employees across multiple jurisdictions may need state-specific policy provisions or addenda to account for differences in leave, pay, reimbursement, or other employment practices. Taking the time to identify those differences before hiring can help managers apply policies consistently and reduce compliance risk later. 3. Employee Benefits Benefits should also be reviewed before hiring an employee in another geographic area. One of the most important questions is whether your current health plan provides meaningful access to care where the employee lives. For example, your medical carrier may have a strong provider network around your headquarters but limited in-network access in another state or region. Before extending an offer, employers should review: Medical plan network availability Employee eligibility under current benefit plans State-mandated disability benefits Paid family or medical leave requirements Paid sick leave requirements Benefit administration processes For employers developing a more geographically dispersed workforce, it may also be worth evaluating whether the current benefits strategy remains sustainable. Depending on the organization and workforce, options such as a national PPO plan or an Individual Coverage Health Reimbursement Arrangement, or ICHRA , may be worth discussing as part of a longer-term benefits strategy. The goal is not simply to determine whether an employee is technically eligible for coverage. Employers should also consider whether the benefits being offered are practical and usable where that employee lives. 4. Commercial Insurance Adding an employee in another state can also affect your business insurance. Workers' compensation is one of the most important areas to review. Your existing workers' compensation policy may need to be extended to include the employee's work state. In some situations, a separate policy or additional coverage arrangement may be required. Employers should notify their insurance advisor or carrier before the employee begins work so the appropriate requirements can be evaluated. Other commercial insurance considerations may include: Employment Practices Liability Insurance Employment Practices Liability Insurance, or EPLI, should be reviewed when an employer expands its workforce into additional jurisdictions. Different state employment laws and employee protections can create different exposures, particularly for remote workers. Cyber Liability Remote employees may also create additional cybersecurity considerations. Employees working from home may access company systems, confidential information, payroll data, employee records, or client information through home internet connections or company-issued devices. Cyber liability coverage and internal cybersecurity practices should be reviewed as the remote workforce expands. Other Liability Exposures Employers should also consider whether the employee will: Travel for business Maintain a home office Use company-owned equipment Drive for work Store company property at home These activities may introduce additional insurance considerations that should be discussed with your commercial insurance advisor. 5. Retirement Plan Administration Retirement benefits can sometimes be overlooked when employers expand into another state. Before hiring, confirm whether the employee will be eligible to participate in your existing retirement plan and whether your payroll and retirement systems are prepared to process the employee correctly. Consider reviewing: Plan eligibility requirements Employee contribution deductions Employer contribution or match calculations Payroll integration with your retirement provider State-sponsored retirement program requirements Several states have established or are implementing state-sponsored retirement savings programs for certain employers that do not offer a qualifying workplace retirement plan. If your organization already offers a retirement plan, those requirements may not apply, but employers should still confirm how the rules work in any state where employees will be located. 6. International Employees Require Additional Planning Hiring someone who will work outside the United States introduces another level of complexity. International employment can create obligations involving: Foreign payroll registration Local employment laws Income tax withholding Social insurance or similar payroll contributions Data privacy Employee benefits Business tax obligations Employers should determine how the individual will legally be employed before work begins. If the employee will be working within the United States , employment authorization must be verified and Form I-9 requirements generally apply. An employee who is otherwise authorized to work may in some circumstances begin employment before receiving a Social Security number. Payroll and employment records should then be updated when the number becomes available. Federal income tax withholding and FICA treatment can also vary depending on an individual's immigration or tax status, and certain tax treaties may affect withholding requirements. Because international employment can quickly involve multiple areas of law and taxation, employers should involve the appropriate tax, legal, payroll, and HR advisors before finalizing the arrangement. 7. Make Sure Your Internal Teams Are Coordinated One of the biggest risks with an out-of-state hire is not necessarily any single requirement. It is that different parts of the organization may not realize the hire affects them. HR may know where the employee lives, but payroll may not know a new state registration is required. Payroll may update the employee's taxes, but the benefits team may not realize the medical network is limited in that area. The hiring manager may approve remote work, but the commercial insurance team may not yet know an employee is working in another jurisdiction. That is why employers should treat an out-of-state hire as a cross-functional decision , not simply a recruiting decision. Before extending an offer, make sure the appropriate people have reviewed the situation across payroll, HR, benefits, retirement, tax, and insurance. Before You Extend the Offer A simple pre-hire review can help identify potential requirements before they become urgent. Before hiring an employee in another state or country, consider confirming: Whether workers' compensation or other commercial insurance coverage needs to change Whether the employee will have appropriate access to your current benefits Whether new payroll withholding or unemployment accounts are required Whether local or state payroll taxes apply Whether employment policies need to be updated Whether state-specific leave or wage requirements apply Whether the employee is eligible for your retirement plan Whether state-sponsored retirement requirements need to be considered Whether the hire creates additional business tax obligations Whether international employment rules apply One Hire Can Affect More Than One Part of Your Business Hiring beyond your home state can open access to a much larger talent pool, but it can also create responsibilities that are easy to overlook when departments operate independently. Payroll, HR, benefits, commercial insurance, and retirement administration are closely connected. A change in one area can quickly affect several others. The best time to identify those considerations is before the employee's first day , not after a payroll issue, coverage question, or compliance requirement surfaces. At Simco , we help employers coordinate these moving pieces across payroll and HCM, HR advisory, employee benefits, commercial insurance, and retirement services. If your organization is considering hiring an employee in another state or expanding your remote workforce, our team can help you identify the areas that should be reviewed before you move forward.

Have a question? Get in touch.