Avoid These 5 Common Open Enrollment Mistakes
Employers commonly make several mistakes during open enrollment, a busy and stressful period that comes with a high potential for errors. For employees, these mistakes can result in confusion and frustration, as well as missed opportunities to make the most of their benefit options. In addition to employee dissatisfaction, these mistakes can lead to potential legal liability for employers.
This Compliance Overview explains five common compliance mistakes employers should avoid making at open enrollment time, including:
- Not communicating benefit changes clearly to eligible employees
- Failing to provide certain health plan notices
- Not distributing open enrollment materials to all eligible individuals, such as COBRA enrollees
- Underestimating the importance of election deadlines
- Not describing the availability of a reasonable alternative standard for health-contingent wellness programs
1. Mistake: Not Communicating Benefit Changes Clearly
Employers frequently change their employee benefit offerings ahead of open enrollment. These changes may include health plan cost-sharing updates or mandated benefits by law. Before the start of open enrollment, employers should identify all benefit changes for the upcoming plan year and clearly communicate them.
For benefits subject to ERISA, changes should be communicated through an updated Summary Plan Description (SPD) or a Summary of Material Modifications (SMM).
2. Mistake: Failing to Provide Required Health Plan Notices
Certain notices must be provided in connection with open enrollment, including:
- Summary of Benefits and Coverage (SBC)
- Summary Plan Description (SPD)
- Children’s Health Insurance Program (CHIP) Notice
- Initial COBRA Notice
- Women’s Health and Cancer Rights Act (WHCRA) Notice
- Medicare Part D Notice
- Grandfathered Plan Notice
- Notice of Patient Protections
- HIPAA Privacy Notice
- HIPAA Special Enrollment Notice
Federal law allows many notices to be provided electronically if delivery rules are met.
3. Mistake: Not Distributing Open Enrollment Materials to All Eligible Individuals
Employers should distribute open enrollment materials to:
- All eligible active employees
- Employees on leave or furlough (e.g., FMLA)
- COBRA qualified beneficiaries
Employers should implement a multichannel communication strategy and maintain distribution records.
4. Mistake: Underestimating the Importance of Election Deadlines
Most employers use a Section 125 cafeteria plan for pre-tax benefit elections, which must be made prospectively and are typically irrevocable for the plan year. Missing deadlines may lead to issues with federal tax compliance and ERISA nondiscrimination rules.
To avoid post-enrollment corrections, employers should communicate deadlines clearly and encourage early participation.
5. Mistake: Not Describing Reasonable Alternative Standards for Wellness Programs
Health-contingent wellness programs must offer and disclose a reasonable alternative standard for meeting requirements to earn a reward or avoid a surcharge.
Failure to comply with these disclosure requirements can lead to HIPAA violations and legal action.
Links and Resources
This Compliance Overview is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice. ©2025 Zywave, Inc. All rights reserved.