What Mandatory Benefits a Company Must Legally Provide to Employees
New Jersey Employee Benefits
Vacation, health insurance, long-term disability coverage, tuition reimbursement, and retirement savings plans are just a few of the many benefits employers may offer employees. These can increase competitiveness by attracting and keeping the best employees. But which benefits are required by law that must a company provide its workers? Understanding mandatory benefits laws will help you evaluate the most appropriate policy that satisfies both employees and your bottom line.
This post addresses benefits legally required under federal law and select New Jersey state-mandated benefits. Employers should review their obligations under local laws, which may provide additional mandated benefits.
What Basic Employee Benefits Must Your Company Provide?
Employee benefits fall into two categories:
Statutory Benefits: Those required by law (“statutory benefits”) and
Health & Welfare Benefits: Usually those an employer chooses to offer voluntarily. Some employers are required to offer certain health benefits or pay a tax instead.
The U.S. Bureau of Labor Statistics states that, “Legally-required benefits provide workers and their families with retirement income and medical care, mitigate economic hardship resulting from the loss of work and disability, and cover liabilities resulting from workplace injuries and illnesses."
Statutory Benefits
Statutory benefits are usually taken care of through payroll and other government structures that are required for all employers. You can skip this section if what you really want to know is about health benefits…
Federal mandatory employee benefits include:
Social Security and Medicare
Unemployment insurance
Workers' compensation insurance
Family and Medical Leave Act (FMLA) time-off protections
New Jersey State mandatory employee benefits include:
New Jersey Paid Sick Leave
NJ Unemployment insurance
Workers' compensation insurance
NJ Family Leave Insurance (Paid Family Leave)
NJ Temporary Disability Insurance
Employers are required to contribute to unemployment insurance through payroll taxes at both the state and the federal level, to assist workers who lose their jobs. Employees who are eligible file an unemployment claim with the state workforce agency.
Workers' compensation insurance provides financial support to people unable to work as a result of a workplace injury or illness. Workers’ Comp is federally required and state mandated but usually bought through a private insurance company. Employers file a claim on the employee’s behalf with the carrier.
In New Jersey, Temporary Disability Insurance and Paid Family Leave Insurance are required by all ]for profit] employers and funded through payroll taxes. Both are programs administered by the state and require no separate insurance policy.
The Family and Medical Leave Act (FMLA) is a federal law that entitles eligible employees of covered employers to take unpaid, job-protected leave for specified family and medical reasons for themselves or covered family members. A covered employer is a private-sector employer with 50 or more employees, and all public employers.
New Jersey similarly has a Family Leave (NJFLA) program that mimics the FMLA in many ways. It is different from the NJ Paid Family Leave. NJFLA entitles eligible employees of covered employers to take unpaid, job-protected leave for specified family and medical reasons. A covered employer is a private-sector employer with 30 or more employees, and all public employers.
These are all considered statutory benefits. These are handled by your payroll provider and really don’t add to this conversation. Therefore, we will move on to why you are really here: Health & Welfare type benefits…
Make sure your business meets it's employee benefit obligations.
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Health & Welfare Benefits
Health Insurance in New Jersey
New Jersey has a system in which it categorizes employers by size. Employers with under 50 employees are in the Small Employer market. It is more or less a pooled market in which different carriers can submit plans that are standardized across the market. Small employers are not required to offer employees Health & Welfare Benefits. That doesn’t mean it is not a requirement in your industry or market. By requirement, we mean you need to offer some type of benefit to compete for talent with your industry competitors.
Employers at and over 50 employees are required to offer certain levels of benefits under federal law.
Under the federal Affordable Care Act (ACA or “Obamacare”), applicable large employers (ALEs) risk a potential penalty if they do not offer adequate and affordable coverage to their full-time employees and their dependents and at least one full-time employee receives a premium tax credit. ALEs are companies with an average of 50 or more full-time employees, including full-time equivalents, during the prior calendar year.
The threshold for "affordable" coverage is adjusted annually for inflation, but the employee's portion of premiums for individual health coverage should not exceed 9.12% of their income for 2023. To meet the "adequate" standard of coverage, also known as the minimum value standard, the policy should provide access to a reasonable network of providers and specialists, and should be designed to pay at least 60% of the total cost of medical services that a plan will cover. The coverage should also meet minimum essential coverage requirements and minimum value.
A GOOD broker will analyze your employees’ affordability as well as provide you with confirmation that a plan meets the standards of coverage. They can also help you determine if a minimum essential coverage plan (MEC) might be an option for your employee population.
Do I have to Pay For Employee Benefits?
Yes. No. Well, both. If you are required by the ACA to offer medical benefits, then you will have to ensure the premiums are affordable according to the law. Almost always, that means you have to contribute to the premium.
If you are not required under the ADA, then you don’t necessarily have to make the premiums affordable, but almost every carrier will require the employer to contribute to the premium in some form. Sometimes that can mean just a 10% contribution toward the single employee rate. Other times, that contribution requirement can be as hgh as 50%. In many benefit plans, the more an employer contributes, the lower the premiums can be. A GOOD broker can guide you on what is required and what is optimal.
What Makes a Good Benefit Package Regardless of What is Mandatory?
Value to your employees and your candidates is what is going to make a plan effective for your business. At Employee Benefits NJ, we focus on what your population wants and will respond to. In many cases, unusual or uncommon benefits like pet insurance, or identity theft protection might have a bigger impact than more traditional offerings. We uncover for employers exactly what benefits can help them to have employees who feel like working with you is their best option and thus they stay and contribute their best.