Statutory Benefits: Navigating Legal Requirements for Employers

Over the past decade, the employee benefits landscape has shifted dramatically. Employees still expect employers to meet their traditional insurance needs (i.e., by providing health, life, and disability insurance). But recently, employee values have shifted to include new expectations, especially in the realms of mental health, telemedicine, wellness programs, and family leave. 

With the influx of new and creative ways for employers to strengthen their compensation packages, many employers are left wondering: where do we start? What do we need to provide, by law, and how do we know if we’re meeting those requirements? 

In this article, we’ll pause the noise (if only for a moment) and get back to basics. We’ll run through which benefits employers are required to offer by law—that is, the “statutory benefits.”

In the end, you’ll know what you need to offer, and where to turn to help you sort it out. 

RELATED: Unique Employee Benefits: The New Norm for Attracting Top Talent? >> 

What Are Statutory Benefits? 

“Statutory benefits” or benefits required by statute, are the non-wage and non-salary related benefits employer must extend to their full-time employees. In other words, these are the “mandatory” benefits. If a benefit is not required by some statute (whether federal, state or local), offering it is optional. 

Which benefits are statutory benefits? That varies based on your size and location. Roughly, here’s the breakdown: 

Statutory Benefits Required by Federal Law for Full-Time Employees

For all employers, the statutory benefits required by federal law for full-time employees are: 

• Social Security and Medicare

  The Federal Insurance Contributions Act (FICA) requires employers to pay taxes that are used to support the federal government’s Social Security and Medicare initiatives, which in turn provide for employees. 
  
  While both employers and employees pay into these funds, employers must withhold Medicare taxes at 1.45% of an employee’s gross compensation, plus 0.9% of their compensation if the employee is a high earner. Businesses are also required to match 6.2% for Social Security funding (up to the wage base) and 1.45% for Medicare funding. 

• Unemployment insurance

  Unemployment insurance is another federal government initiative funded through payroll taxes at both the national and state levels. While unemployment insurance taxes are administered at the state level, paying into these funds is a requirement in all U.S. states. 

• Workers’ compensation insurance 

  Workers’ compensation insurance also varies in price and requirement by state, but, like unemployment insurance, is required at a basic level in all U.S. states. 

Statutory Benefits Required by State or Local Law for Full-Time Employees

For all employers, the statutory benefits required by state or local law for full-time employees are: 

The statutory benefits required by state or local law vary depending on the locations(s) in which you operate and employ workers. For example, certain states, like California, Hawaii, New York, New Jersey and Rhode Island, require employers to provide employees with short-term disability insurance.

Some states, like California, Connecticut and Illinois, require employers to enroll their employees in a state-sponsored retirement plan (or a qualifying alternative).

Certain states also require employers to offer paid sick leave, no matter your business size. 

It's always a best practice to check with an HR compliance expert to determine which statutory benefits you are required to offer based on your (and your employees’) geographic locations. 

Statutory Benefits Required by Federal Law for ACA Applicable Large Employers

For ACA-covered “Applicable Large Employers (ALEs)”, the statutory benefits required by federal law forfull-time employees are: 

• Health insurance

  If you are an ACA-covered ALE, you are required to offer qualifying health insurance to your full-time employees. The health insurance you provide must meet affordability and adequacy requirements set by the federal government. 
  
  In general: 
   
  • Your plan is subject to minimum essential coverage requirements 
  • Your employees’ premiums must not exceed 9.12% of their income 
  • Your plan must provide reasonable access to providers and specialists
  •  Your plan must pay for at least 60% of the cost of medical services covered by the plan

RELATED:  How to Meet Small Business Health Insurance Requirements Effectively >> 

• Leave that is compliant with the Family and Medical Leave Act (FMLA)

  While state-required leave may raise these minimums, the federal government’s FMLA provides that covered employers (i.e., those with 50 or more employees) must allow for 12 weeks of protected (unpaid) leave during the year for qualifying family and medical-related reasons. 

RELATED:  FMLA Rules: Answers to Your FAQs & Free Compliance Checklist 

If you run a business that employs fifty or more full-time employees, or if you’re growing and getting close to that number, it’s critical that you understand your obligations under the Affordable Care Act.

For more complete information about your obligations under the ACA, check out our blog post: Applicable Large Employer: Laws Affecting Businesses with 50 Employees, and speak with an HR compliance expert. 

Axcet HR Solutions: Here to Help You Make Sense of Statutory Benefits Requirements and Design the Perfect Total Compensation Package 

For many small businesses, deciding which benefits you’ll offer can feel like an overwhelming task. Luckily, you don’t have to do it on your own. You have experts on your side, ready to help you fill in knowledge gaps and make compliant decisions confidently.

With assistance from dedicated HR compliance experts, you’ll be empowered to make people-focused choices with the peace of mind you deserve. 

Axcet HR Solutions is a certified professional employer organization with over thirty years of experience in risk management, HR compliance and more. 

Let us handle the HR details while your business continues to grow and thrive. To find out more about how Axcet can help, schedule a consultation with our experts today.