The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that governs employee health and pension plans in the private industry. By establishing standards and requirements with which the plan sponsors must comply, ERISA strives to protect the participants of those plans
Who must comply with ERISA?
In general, ERISA applies to all private-sector employee welfare plans that:
- Involve a plan, fund, or program established or maintained by an employer; and
- Provide specific benefits to participants and beneficiaries including medical, surgical, hospital care, disability, sickness, accident, death, vacation, and day care centers.
The plan may be self-funded or insured and must cover at least one employee. A plan covering only self-employed individuals or partners would not be subject to ERISA.
The following are exempt from ERISA: governmental plans; church plans; plans maintained outside of the U.S. primarily for the benefit of nonresident aliens; and plans that were created solely to comply with state laws on disability, unemployment, or workers compensation.
What are the requirements under ERISA?
ERISA places many requirements on employee benefit plans. The major requirements include:
- A written plan document must notify a participant of his/her rights and obligations under the plan as well as describe the plan's operational rules.
- The Summary Plan Description (SPD) must be distributed to participants within certain timeframes.
- Anyone with discretionary authority, control, or responsibility of the plan's management or administration is a fiduciary and must comply with certain requirements including acting in the sole interest of the plan's participants and beneficiaries.
- Fiduciaries of a plan with plan assets will need to meet certain bonding requirements.
- Claims must be determined and communicated according to specific guidelines.
- Plan assets are for the exclusive purpose of providing benefits to plan participants and reasonable administrative expenses.
- Certain plans must file an annual report (Form 5500) and distribute a Summary Annual Report to participants.
- Employer plans with 20 or more employees must comply with COBRA requirements.
- HIPAA requirements regarding portability, privacy, and security must be in compliance.
Please contact your advisor for a copy of our Compliance Checklist, which will assist you in complying with these requirements as well as other disclosure and reporting requirements for employee benefit plans.
FAQs
Is a voluntary plan subject to ERISA?
If a voluntary plan with minimal employer involvement meets the Safe Harbor Criteria, it is not subject to ERISA or its requirements. The Safe Harbor Criteria are:
- 100% employee contributions
- Employee participation is completely voluntary
- Employer does not endorse the program. However, the employer may permit the insurer to publicize the program to employees and the employer may collect premiums through payroll deductions and remit premiums to insurer.
- Employer receives no consideration for plan implementation. However, reasonable compensation (no profit) is permissible for administrative services rendered for the plan.
Additional guidance regarding employer involvement of a Voluntary Safe Harbor plan:
- Plan documents should not indicate that the plan is sponsored by the employer.
- The employer should not encourage or urge participation in the plan.
- Vendor presentations in the workplace are permissible.
- Employer may notify employees of the existence of the plan but should refer plan questions to vendor.
- Maintaining eligibility lists and submitting enrollment forms to the vendor are permissible.
- Allowing the deductions to be taken pre-tax through the employer's cafeteria plan may deem the employer as endorsing the plan.
Additional Resources
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