Don't let December sneak up on your benefits program.

The window is short. The decisions stick for 12 months.

Open enrollment is the one time each year employees can change their benefit elections without a qualifying life event. For calendar-year plans, open enrollment typically runs October through November, with January 1 effective dates. Here's what has to happen — and what commonly goes wrong.

• Set your renewal date early — carriers typically release renewal rates 60–90 days before the plan anniversary. Do not wait for the carrier to prompt you.
• Communicate rate changes clearly — employees need to understand what their new contributions will be before they make elections, not after.
• Collect waivers in writing — employees declining coverage must sign a waiver. Keep this documentation. It matters at ACA audit time.
• Update your HCM (Human Capital Management)/payroll — new elections must be loaded and confirmed before the first payroll of the new plan year. A missed update creates billing discrepancies that take months to untangle.
• Confirm dependent documentation — if you require documentation for dependent enrollment (birth certificate, marriage certificate), collect it during open enrollment, not after.
• Test your benefits portal — if you use an online enrollment platform, test it before you send employee communications. Platform issues during OE week are one of the most common year-end headaches we see.

50+ employees? ACA reporting is not optional.

Applicable Large Employers (ALEs) — those with 50 or more full-time equivalent employees — must file IRS Forms 1094-C and 1095-C annually. The 2026 reporting cycle covers the 2025 plan year. Here's what you need to have in order by year-end.

• Confirm your ALE status — count your full-time equivalent employees for 2025 now. If you crossed the 50 FTE threshold at any point during the year, you're an ALE for reporting purposes.
• Verify affordability — for 2026 plan years, the ACA affordability threshold is 9.96% of employee household income (up from 9.02% in 2025). Run affordability calculations before your renewal is finalized.
• Track offers of coverage monthly — you need to know which employees were offered coverage, what it cost, and whether they enrolled, for every month of the calendar year. If your payroll or HCM (Human Capital Management) system isn't capturing this, fix it now.
• Prepare 1095-C forms — employees must receive their 1095-C by March 2, 2026. Electronic filing with the IRS is due March 31, 2026.
• Document safe harbors — if you're relying on a W-2, Rate of Pay, or Federal Poverty Line safe harbor to establish affordability, document which one and ensure it's applied consistently.

Employee account balances need attention before December 31.

Tax-advantaged accounts have different year-end rules depending on the account type. Getting this right — and communicating it clearly to employees — prevents forfeitures and employee complaints.

• Health FSA — 2026 limit is $3,400 (up from $3,300 in 2025). Employees with unused balances face 'use it or lose it' rules unless your plan offers a grace period (up to 2.5 months) or a carryover (up to $680 for plans starting in 2026). Communicate deadlines clearly — most employees don't check their balance until January.
• HSA — 2026 contribution limits: $4,400 for self-only coverage, $8,750 for family coverage (up from $4,300/$8,550). Unlike FSAs, HSA funds roll over indefinitely. Encourage employees to max out contributions before year-end if eligible.
• Dependent Care FSA — 2026 limit is $7,500 per household ($3,750 if married filing separately). Funds must be used for qualifying childcare expenses incurred before December 31. Unused balances are forfeited unless a grace period applies.
• Confirm your plan documents reflect 2026 limits — if your plan was established with a different limit, the plan document governs. A mismatch can create compliance issues.

As of January 1, 2026, every California employer is covered.

The CalSavers phased rollout is complete. Every California private-sector employer with at least one W-2 employee must now either offer a qualified retirement plan or register for CalSavers. There is no size exemption anymore.

• If you offer a 401(k), SIMPLE IRA, SEP-IRA, 403(b), or pension — submit a CalSavers exemption at employer.calsavers.com. Even if your plan is legitimate, you must formally register your exemption or you will receive penalty notices.
• If you do not offer a qualified plan — register for CalSavers immediately at employer.calsavers.com. Add all eligible employees (age 18+, CA W-2 wages) within 30 days. New hires must be added within 30 days of their start date.
• Default contribution rate is 5% of gross wages, automatically escalating 1% per year to 8% unless employees change their election. Employees can opt out.
• Penalties: $250 per eligible employee after 90 days of noncompliance from the date of notice. $500 per employee after 180 days. Penalties compound.
• New employers in 2026: If your business first reported having employees in 2026, your registration deadline is December 31, 2026.

SDI rate increased to 1.3% for 2026.

California's SDI withholding rate increased from 1.2% to 1.3% effective January 1, 2026. This affects every California W-2 employee. Here's what to confirm before year-end.

• Verify your payroll system updated to 1.3% on January 1, 2026 — if you've been processing payroll this year, your provider should have applied this automatically. Confirm in your payroll settings.
• No wage cap — since January 1, 2024, SDI applies to all wages with no maximum. High earners will see meaningful deductions all year.
• Maximum weekly SDI/PFL benefit for 2026 is $1,765 (up from $1,681 in 2025).
• SDI covers both Disability Insurance (DI) and Paid Family Leave (PFL) — funded through the same employee payroll deduction.
• Prepare for 2027 — the SDI rate is set annually by the EDD. Watch for the Q4 announcement and update your payroll system before January 1.

The worst time to evaluate your benefits is after you've already renewed.

Most employers receive a renewal offer from their carrier in Q4 and accept it without running an alternative market analysis. Here's why that's a problem — and what to do instead.

• Get your renewal rates as early as possible — carriers are required to provide rates in advance. Push your broker to get renewal numbers 90 days out, not 30.
• Run the full market — in California's employer market, every licensed broker accesses the same filed rates. The difference between staying and moving is plan design, network, and administration — not secret pricing.
• Model total cost of ownership — premium is only part of the cost. Consider: employer contribution strategy, employee cost-sharing structure, plan utilization data, and administrative burden on your HR team.
• Evaluate your contribution strategy — if your employer contribution hasn't been reviewed in 2+ years, you may be overpaying relative to market or underpaying relative to what it takes to attract employees in your sector.
• Consider adding or removing voluntary benefits — year-end renewal is the right time to add supplemental benefits (critical illness, accident, hospital indemnity, legal, pet) or remove ones with low enrollment.

Benefits and payroll have to talk before December 31.

Year-end is when benefits and payroll systems get out of sync. Here's a coordination checklist to run before the calendar rolls.

• Confirm W-2 box 12 codes — employer-sponsored health coverage costs must be reported in Box 12, Code DD on employees' W-2s. Verify your payroll system is capturing this correctly for all employees.
• True up FSA/HSA contributions — confirm that what was elected matches what was actually withheld. Payroll errors during the year (leaves, terminations, mid-year changes) often leave discrepancies.
• Process termination benefits correctly — terminated employees have COBRA rights. Ensure COBRA notices went out within 14 days of qualifying events throughout the year. Cal-COBRA applies to groups with 2–19 employees.
• Audit your enrollment data — pull a report of who is enrolled in what, and cross-reference against your carrier invoices. Billing discrepancies compound over a plan year and are painful to unwind.
• Update beneficiary designations — remind employees to review and update beneficiaries on life insurance and retirement accounts. This is often skipped at open enrollment and causes serious problems.
• Archive your plan documents — keep copies of your Summary Plan Descriptions (SPDs), plan amendments, and wrap documents. ERISA requires that these be available to employees upon request.