What is ERISA and Does it Apply?
ERISA, which stands for the Employee Retirement Income Security Act, is a federal law regulating employer-sponsored group benefits. Nearly every employer, regardless of their size, is subject to ERISA if they offer even one employer-provided group benefit such as health, dental, vision, accidental death & dismemberment, disability, or group term life insurance; medical flexible spending account or health reimbursement account; wellness and employee assistance program; or any other benefit for which the employer contributes to the cost. The only exempt employers are churches and government entities. Besides requiring certain plan features, the law also mandates detailed reporting requirements, both to the Department of Labor and other government agencies and to employees and covered members under your policies.
The employer is solely responsible for ERISA compliance. Penalties may be enforced for failure to comply with ERISA regulations, including DOL enforcement actions and penalties as well as employee lawsuits. Certain infractions can entail up to $100/day penalty for every employee that is affected by a violation until the violation is corrected. The penalty for late delivery of SPD or Wrap can be as much as $110/day per plan. Late filing of form 5500 can result in fines as high as $1,100 per day.
While ERISA was first enacted in 1974, recent changes under the Patient Protection and Affordable Care Act (PPACA) have added additional requirements and changed reporting deadlines. The deadline for each requirement varies, depending on when your plan was enacted, whether it is grandfathered under PPACA, whether material changes have been made, and other exceptions. Copies of certain plan documents must be also available to participants and beneficiaries on written request.
Requirements Under ERISA & PPACA
If you offer any of the above-mentioned health and welfare benefits, you must meet specific requirements, specifications, and deadlines for plan documents under ERISA as well as under PPACA. Here are some key provisions listed below:
ERISA Benefit Notices
All eligible employees must receive ERISA Benefit Notices upon enrollment and re-enrollment of your health plan. Depending on company size and other criteria, you may be required to provide employees with the following employee notifications:
Form 5500 and Summary Annual Report
ERISA further requires employers with 100 or more participants to annually report certain information to the DOL on Form 5500. Form 5500 returns ask for information about the plan, including plan name, plan year, plan sponsor, plan number, participants, insurance costs, and financial data. Employers who set up an SPD Wrap can file one 5500 report for the SPD Wrap covering all health and welfare plans.
Once a Form 5500 is completed and filed, you must prepare a Summary Annual Report (SAR) for each of your welfare benefit plans subject to ERISA reporting, or just one if done under an SPD Wrap. The SAR summarizes Form 5500 information and notifies participants Form 5500 has been filed and a copy is available to those who request a copy. SARs must be distributed to covered participants within nine months after the end of the plan year. A SAR is not required for plans that are not required to file a Form 5500.
An employer must have a written Summary Plan Description (SPD) for each separate welfare benefit plan, informing participants of eligibility requirements, benefits, claims and appeals procedures, and rights under ERISA. Your insurers may provide some but not all information required for SPD compliance. It is a common mistake by employers to think the summary insurance information they receive from their insurance provider meets the SPD requirements. A common approach is to combine all SPDs into one overall SPD Wrap notice, tying in the required ERISA language and simplifying the SPD notice process.
The SPD and Wrap must be distributed to newly-enrolled participants within 90 days of when coverage started, or within 120 days of a new plan being established. A Statement of ERISA Rights is also required.
In order for organizations to allow employees to pay for medical and dental insurance premiums on a pre-tax basis, the IRS requires a Premium Only Plan document that specifies details about the coverage, eligibility under the plan, election procedures, and rules of participation. It also requires a Summary Plan Description (SPD).
Sources: United States Department of Labor