When an employer established an employee benefit plan (ERISA health and welfare plan), any contributions that employee’s make are regulated by ERISA as ERISA plan assets.
There are volumes of regulations regarding the classification and handling of plan assets. Basically, for small employer health plan contributions, the employer needs to ensure that the amount being deducted from the employee’s payroll is accurate – not more than the required contribution – and that it is remitted to the insurance carrier on the next billing cycle.
Where employers typically run into issues is where and an employee has been making contributions but the employer has not updated eligibility records with their insurance carrier – to add a dependent for example. The employer is collecting funds from an employee and not remitting to the carrier.
Another common occurrence is when an employee terminates in the middle of a month and they have made one or more premium contributions for the current month and the employer terminated their health coverage at the beginning of the month and does not properly reconcile and return the employees over-payment.
A complete reconciliation of employee contributions is recommended after open enrollment and then individual reconciliations when employees make changes to their eligibility or employment status.