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COBRA, ACA reporting, PEOs, payroll and third-party administration — the back-office work that keeps you compliant year-round. Here’s what each function does, what triggers at which headcount, and where employers most often get caught.
Most of what an employer owes its workforce is not optional, and almost none of it is intuitive. Hire your twentieth employee and COBRA applies. Reach fifty full-time equivalents and the ACA employer mandate and FMLA both switch on. Cross one hundred plan participants and a Form 5500 comes due. None of these thresholds announces itself, and the penalties for missing them are assessed per employee, per month, in arrears.
That is the practice this guide describes. Where the benefits practice is about choosing and buying coverage, the HR and compliance practice is about administering it correctly — the notices, filings, deadlines, records and payroll mechanics that sit underneath every plan an employer sponsors, plus the wage, leave and hiring rules that apply whether or not benefits exist at all.
It is unglamorous work with an unusual risk profile: the cost of doing it well is predictable and modest, and the cost of doing it badly is unbounded and arrives without warning, often years later, in a Department of Labor audit or an employee complaint.
“Human resources” covers a wide range of activity. The part that belongs in an insurance and benefits practice is the administrative and compliance layer — the work that has deadlines, filings and statutory penalties attached. Broadly, six functions:
These functions are connected in one direction that matters: payroll is upstream of everything. A misclassified employee produces a wage claim, an incorrect ACA filing and an inaccurate workers’ compensation audit at the same time, from a single error made once in a payroll system.
Employers tend to treat HR compliance as overhead. It behaves much more like an uninsured liability.
The pattern we see most often is an employer who buys good coverage and then administers it informally — COBRA notices sent late or not at all, no written plan document, no Summary Plan Description, handbook policies that contradict the actual practice. The insurance is sound; the exposure is in the paperwork around it.
Nearly every federal obligation switches on at a specific employee count. Knowing your number, and watching it as you grow, is the single highest-value compliance habit.
Two counting traps deserve attention. The ACA counts full-time equivalents, so part-time hours aggregate — forty half-time employees make you an applicable large employer. FMLA counts employees on the payroll, including those on leave, and applies only if fifty of them work within seventy-five miles of the same worksite.
Employers with twenty or more employees must offer continuation coverage after a qualifying event. The administration is almost entirely a matter of notices and clocks: an initial general notice at enrollment, an employer notice to the plan administrator within thirty days of a qualifying event, an election notice within fourteen days after that, a sixty-day election window, and forty-five days for the first premium. Standard duration is eighteen months, extended to twenty-nine for disability and thirty-six for events such as divorce or a dependent aging off.
Missed notices are the most common COBRA failure and they carry statutory penalties plus potential liability for the claims the person would have had covered. This is the single function most worth outsourcing, because the deadlines are unforgiving and the tracking is mechanical.
Applicable large employers must determine full-time status month by month, test affordability against the 2026 threshold of 9.96% using one of three safe harbors, and file Forms 1094-C and 1095-C. The §4980H(a) penalty for failing to offer coverage to 95% of full-time employees is $3,340 per full-time employee per year for 2026; the §4980H(b) penalty for unaffordable or low-value coverage is $5,010 per affected employee. Reporting failures carry separate penalties.
Nearly every private-sector health and welfare plan is an ERISA plan, which means a written plan document, a Summary Plan Description distributed to participants, fiduciary duties, and an annual Form 5500 for plans with 100 or more participants. Many small employers do not realize they have an ERISA plan; a certificate of insurance from the carrier is not a plan document and does not satisfy the requirement.
FSA, HSA and HRA programs require a Section 125 plan document, substantiation of expenses, nondiscrimination testing and year-end reconciliation. 2026 limits: health FSA $3,400 with carryover up to $680; HSA $4,400 self-only and $8,750 family; dependent care FSA $7,500 per household.
Leave is where federal, state and local rules overlap most, and where tracking failures are most visible to employees.
Twelve weeks of unpaid, job-protected leave for employers with fifty or more employees within seventy-five miles, for employees with twelve months of service and 1,250 hours in the preceding year. Health coverage must continue during leave on the same terms. The eligibility, rights-and-responsibilities and designation notices each have deadlines, and failing to designate leave as FMLA does not extend the entitlement but does create exposure.
New York City employers face a further layer: amendments to the Earned Safe and Sick Time Act effective February 22, 2026 expand the permitted uses of leave, add a separate 32-hour unpaid leave bank that must be tracked apart from paid sick time, fold the Temporary Schedule Change Act into ESSTA, and incorporate the prenatal leave rules. Employers with 5–99 employees provide 40 hours of safe and sick leave; those with 100 or more provide 56.
Three separate banks, one employee. A New York City employer now tracks paid safe and sick leave, a 32-hour unpaid bank, and 20 hours of prenatal leave separately — on top of FMLA, DBL and PFL. Handbooks written before 2026 are almost certainly out of date, and a policy that understates an entitlement is evidence against the employer.
The largest dollar exposure in employment law, and the one most often created by well-intentioned managers.
An employee is exempt from overtime only if they satisfy both a salary test and a duties test. Job titles are irrelevant. After several years of litigation, the Department of Labor restored the pre-2024 federal salary level in May 2026: $684 per week ($35,568 a year) for the executive, administrative and professional exemptions, and $107,432 in total annual compensation for the highly compensated employee exemption.
New York sets its own, substantially higher thresholds for the executive and administrative exemptions, effective January 1, 2026:
The federal minimum remains $7.25 per hour. New York’s rose on January 1, 2026 to $17.00 in New York City, Nassau, Suffolk and Westchester, and $16.00 in the remainder of the state. From 2027, New York increases are indexed to a three-year average of the regional consumer price index rather than set on a fixed schedule.
Treating a worker as an independent contractor when the relationship is functionally employment produces liability on several fronts at once: unpaid overtime, unpaid payroll taxes, an uninsured worker under the workers’ compensation policy, and exclusion from benefit plans that should have covered them. It is also the exposure most likely to surface during an unrelated audit.
Criminal history, Social Security verification, motor vehicle records and professional license checks are all legitimate and all regulated. The Fair Credit Reporting Act requires standalone written disclosure, written authorization, and a two-step adverse action process — a pre-adverse action notice with a copy of the report, a reasonable waiting period, then a final notice. New York layers on its own restrictions: Article 23-A governs how criminal convictions may be considered, New York City’s Fair Chance Act controls the timing of any inquiry, and effective April 18, 2026 New York State employers may no longer request or use consumer credit history in hiring, promotion or retention decisions.
The practical rule is consistency: screen the same way for the same role every time, document the standard in advance, and apply it uniformly. Ad hoc screening is what turns a defensible decision into a discrimination claim.
Safety belongs in this practice because it is the one compliance function with a direct, measurable effect on insurance cost. Workers’ compensation premium is driven by payroll, classification codes and the experience modification factor — and the modifier reflects several years of loss history, so a bad year raises cost for years afterward.
The work itself is unglamorous: a written safety program, hazard assessment, documented training, incident investigation, OSHA 300 log maintenance and posting, and a return-to-work program that brings injured employees back on modified duty rather than leaving claims open. New York employers in certain classifications also undergo mandatory safety and loss prevention consultations when payroll and loss experience cross statutory thresholds.
Return-to-work deserves particular emphasis. Claim duration, not claim frequency, drives cost, and a modified-duty program is usually the cheapest available lever on the workers’ compensation line.
Return-to-work deserves particular emphasis. Claim duration, not claim frequency, drives cost, and a modified-duty program is usually the cheapest available lever on the workers’ compensation line.
The PEO tradeoffs are worth stating plainly, because they are rarely volunteered. You do not own the plan, so you cannot design it. Your renewal follows the PEO’s book rather than your own experience. Bundled pricing makes the true cost of benefits difficult to isolate. Workers’ compensation runs through the PEO’s master policy, so you build no experience history of your own. And exiting after several years means re-underwriting everything from scratch, usually at a moment you did not choose.
We place PEOs when they are the right answer, and we model the direct alternative beside them so the decision is made against real numbers rather than a single bundled rate.
These are the services under Resources › HR & admin tools on our site:
Bookkeeping and individual tax sit at the low end; business tax and payroll above that; audit, attest, valuation, forensic, and advisory work rate substantially higher. Percentage of revenue by service is the first question on every application.
If you do only one thing: write down every recurring deadline with the person responsible for it, and review the list quarterly. Most of what goes wrong in this practice is not a hard question answered incorrectly — it is a routine obligation that nobody owned.
Compliance work sits between disciplines, which is exactly why it falls through gaps. The payroll vendor assumes the broker handles ACA reporting. The broker assumes the accountant handles the 5500. The employer assumes someone does. Nobody does.
Group Coverage, Inc. has been placing employee benefits and business insurance since 1997, and we handle property and casualty, employee benefits, life and disability, and HR and payroll for many of the same clients. That combination matters here more than anywhere else in our practice: the classification decision that drives your workers’ compensation premium, the leave policy that shows up in an EPLI claim, and the plan document behind your 5500 are handled by people who talk to each other, in one office.
We are independent, so the payroll partner, the PEO and the carriers are all selected rather than assumed — and we will tell you when the bundled option is genuinely cheaper, and when it only looks that way.
Tell us your headcount, your states and what you sponsor today, and we’ll map your obligations and the deadlines that come with them.
Group Coverage, Inc. is an independent insurance brokerage, in business since 1997. This guide is for general informational purposes and is not legal, tax or employment advice, nor is it a policy document; obligations vary by employer size, industry, state and locality, and employment law changes frequently. Wage thresholds, contribution limits, penalty amounts and effective dates reflect 2026 and several changed during the year — confirm current requirements with qualified counsel before acting on them.
© 2026 Group Coverage, Inc. All rights reserved.
