How well do you understand your ERISA Compliance requirements? This blog post:
- Summarizes ERISA essentials
- Answers common questions
- Addresses misconceptions among employers
What is ERISA?
Let's start with the basics. The Employee Retirement Income Security Act (ERISA) is a set of federal laws designed to protect employees of private employers who provide pension, retirement, or profit-sharing plans; and also of private employers who provide insurance coverage.
Which employers must follow ERISA laws?
- ERISA law applies for most employers, regardless of size or type of business. This includes corporations, S corporations, LLC, sole proprietorships, and nonprofits.
- ERISA law does not apply to governmental employers, which includes public school districts.
- ERISA law does not apply to IRS-defined "church plans."
Which plans are subject to ERISA?
Common examples include:
- Group medical plans
- Dental plans
- Vision plans
- Health Care Flexible Spending Accounts (FSAs)
- Health Reimbursement Arrangement (HRA)
- Short term and long term disability plans
- Group term life/AD&D insurance plans
It is important to note that some plans are not subject to ERISA:
Examples include:
- Adoption assistance plans
- Dependent Care Flexible Spending Accounts (FSA)
- Health Savings Accounts (HSA)
- Certain voluntary individual plans
What compliance concerns does an employer have when they are subject to ERISA?
- Written documents, reporting, and disclosures are all part of ERISA compliance.
- A benefit booklet or insurance certificate alone does not satisfy Summary Plan Description (SPD) rules required by the Department of Labor (DOL)
- Insurance carriers are not responsible for providing an SPD, as they are required to meet state insurance laws only.
- Employers are responsible for their own ERISA compliance.
- This encompasses: written plan documents that include specific content, Summary Plan Descriptions (SPD), claim-processing procedures, Summary Annual Reports (SAR), and Form 5500 filing (employers with over 100 participants only)
Why do I need a Summary Plan Description (SPD) if I get the benefit booklets from the insurance carriers?
The benefit booklet or insurance certificate alone does not satisfy the Department of Labor (DOL) summary plan description requirement.
Why doesn’t my insurance carrier provide a Summary Plan Description?
Insurance carriers only are required to meet state insurance laws and are not responsible for providing the SPD.
How does a Wrap Plan help me satisfy the ERISA requirements?
A Wrap plan is a plan document/summary plan description that either wraps around a single benefit or bundles multiple benefits under one ERISA plan number. Wrap plans are an easy way to create the companion ERISA language to the insurance certificates so that when distributed to participants together the plan can remain compliant with ERISA plan document and SPD requirements.
If I have less than 100 employees, do I still need a Wrap plan?
Yes, there is no small employer exception from the ERISA plan document/SPD requirement. The small employer exception is only applicable for Form 5500 filing requirements when the employer has less than 100 participants on the first day of the plan year and has an unfunded plan.
What are the penalties for not providing a summary plan description to plan participants?
Solely providing benefit booklets or insurance certificates for employer sponsored benefits will not satisfy the DOL SPD requirements. The DOL can assess a penalty for failing to provide the SPD in a timely manner. Failure to provide the SPD within 30 days of written request can be up to $110 per day, per request (as adjusted for inflation). Failure to provide the SPD to the DOL can result in a penalty of up to $152 per day (as adjusted for inflation). The DOL could tack on additional penalties for failure to act as a fiduciary in regards to plan compliance.
Why do you need a Wrap plan?
Wrap plans are a function of complying with ERISA’s plan document and summary plan description (SPD) requirements. Keep in mind...Wrap plans are an easy way to create the companion ERISA language to the insurance certificates so that when distributed to participants together the plan can remain compliant with ERISA plan document and SPD requirements. Wrap plans also help streamline the Form 5500 process because multiple lines of coverage can be combined under 1 ERISA plan number and 1 Form 5500 (when applicable).
Remain Compliant With Our ERISA Essentials Package:
2 to 99 Eligible Employees
FULLY INSURED or SELF FUNDED - Includes (up to 10 plans):
- Prepare WRAP Summary Plan Description (SPD) & Plan Document
- Prepare Summary of Material Modification (SMM) (when needed)
- PCORI filled out and signature ready
- 3 Ring Binder of Everything, WRAP-SMM-Portal Access-Notices-Direct Contacts
- Provide Required ERISA/ACA Model Notices
- Guarantee ERISA documents are up to date with current regulations
- Provide other recommended Notices & Forms
- All Information Provided on Flash Drive & Cloud(Employer Portal)
- Access to BASIC's Compliance Experts
- 24/7 access to Secure Online Client Documents
- Invitation to BASIC's Regulatory Compliance Webinars
- Online Employer Calendar-overview of important dates
- Audit assistance
- Receive BASIC's Monthly Newsletter
100+ Eligible Employees
FULLY INSURED or SELF FUNDED - Includes Above, Plus:
- Prepare 5500 for Filing with Schedule A&C
- Prepare Summary Annual Report (SAR)
- 5500 Filing Extension - free for ERISA Essentials clients
Article Written by our Employee Benefits Director of Client Services, Lupé Salgado
This blog is for educational and/or informational purposes only and does not constitute legal advice.
