Understanding ERISA Compliance for Employer-Sponsored Benefits Plans
The federal Employee Retirement Income Security Act (ERISA) provides guidance for retirement plans as well as welfare benefit plans provided by employers. This includes 401(k) plans, profit sharing plans, pensions, life insurance, health insurance, disability plans, dental, and other benefits. The Department of Labor (DOL) enforces ERISA compliance as well as ensures that employers who offer benefits plans comply with the law.
ERISA compliance is an important issue for employees receiving benefits from their employers. If you think your employer or benefits plans are not in compliance with ERISA, contact an ERISA attorney at CJ Henry Law Firm, PLLC today.
ERISA Compliance Requirements for Health & Welfare Plans
Most health and welfare plans for employees must comply with ERISA. This is true no matter the size of the plan group or employer. ERISA applies to all group health plans sponsored by employers, including self-insured and fully insured plans. All private organizations, including non-profits, must meet ERISA compliance. However, plans offered by the government, including federal, state, and local entities, do not have to comply with ERISA. It is important to note that benefits considered “regular payroll practice,” such as overtime pay, paid medical leave, and unfunded sick pay, are also exempt from ERISA compliance.
ERISA Compliance Requirements for Retirement Plans
Although employers don't have to establish retirement accounts for their employees, if they choose to offer them, they must be compliant with ERISA. This means that they must meet minimum standards for retirement plans offered by private employers.
ERISA compliant retirement plans must do the following:
- Provide easy access to written information about the Qualified Retirement Plan’s funds through mailings periodically or in hard copy format at the workplace.
- Explain to plan participants how to claim retirement plan benefits without undue difficulty.
- Minimize risk of loss through well-diversified investment strategies.
- Provide participants with information about what their plan consists of.
- Provide participants with periodic summaries of financial reports on investment returns.
The DOL may penalize retirement plans that are not ERISA compliant, and participants may have recourse.
Documents Your ERISA Plan Should Provide You
ERISA compliance is important for employer provided benefits. Such plans should provide plan participants with the following:
- Summary Plan Description (SPD)
- Certificate of Coverage
- Summary of Benefits
A summary plan description (SPD) must be provided to plan participants for ERISA compliance. The SPD communicates rights and obligations to plan participants. It may list processes and procedures through which you can file a claim and your rights when you file a claim for benefits. It will also describe your obligations under the plan, or what you should do in order to obtain benefits. The document must be in plain language that participants can easily understand.
When signing up for benefits, plan participants usually receive an SPD. However, in order to meet ERISA compliance, employers must distribute SPDs within 90 days of when a participant obtains coverage. If the employer does not distribute an SPD, then the plan may not be ERISA compliant.
A certificate of coverage is a document that displays details about the benefits of the plan. Participants may use the certificate of coverage as proof that they have ERISA compliance and coverage under an employer provided plan. It should include the insurance company name, group and ID numbers, and other information necessary to make claims.
The summary of benefits is a booklet or document that details all of the benefits provided under an ERISA plan. This document offers information about coverage, co-pays, deductibles, and other information that participants will need in order to utilize benefits under an ERISA plan.
Reporting and Disclosure
ERISA compliant plans must update participants when there are any changes to the plan. This may often be done through a Summary of Material Modification (SMM). ERISA provides guidelines for when SMMs must be provided and how changes to plans must be communicated to participants. These disclosures are an essential part of ERISA compliance.
Employer sponsored plans must submit reports to the DOL annually. This is generally done through a Form 5500. It is important to note that only certain ERISA regulated plans are required to file a Form 5500. The Form 5500 must then be summarized and distributed to plan participants through a Summary Annual Report (SAR). You should receive a SAR from your ERISA plan annually.
Contact an Attorney About ERISA Compliance Today
To learn more about ERISA compliance, contact CJ Henry Law Firm, PLLC.