What is ERISA and what is required in order to stay in compliance with them?

• Below is some information about ERISA, the Employee Retirement Income Security Act. This was enacted to protect individuals in health and welfare and retirement plans by requiring plan administrators to provide participants certain information about the plan, among other things. Not only are fully insured group health plans subject to ERISA, but also dental, vision, group term life insurance plans, accidental death and dismemberment plans, to mention a few. Some of what needs to be provided in order to stay compliant with ERISA is listed below.
  • Plan Document - The Plan Document is a comprehensive written instrument describing the operation and administration of an employer's plan, written in legalese. It is not required to be distributed to employees, unless requested.
  • Some employers assume incorrectly that the insurance policy, coverage certificate, or plan booklet they receive from their insurance carrier or third-party administrator satisfies the plan document requirement. While these documents often include detailed descriptions of the benefits available under the plan, they rarely include all of the information needed to satisfy ERISA requirements.
  • Summary Plan Description (SPD) - An SPD details everything about the plan, and is a summary of the plan document, written in such a way that participants can easily understand it. It must be distributed to employees annually. Specifically, employees must get an SPD within 90 days after they are covered by the plan, and within 30 days of requesting an SPD.
  • Benefits Notices - ERISA requires that additional information be provided to participants in group health plans about coverage and beneficiaries' rights and responsibilities, to include COBRA continuation coverage and HIPAA pre-existing condition exclusions.

Why does an employer need to worry if they don't have a plan document and SPD?

• The insurance policy or contract issued to an employer rarely meets all the requirements of an ERISA plan document. This is not surprising, given that an insurer's main focus is generally on complying with state laws regulating insurance, and not on ERISA compliance. Even when insurers attempt to satisfy ERISA's requirements, the resulting document does not typically contain all of the provisions designed to protect the plan, the plan administrator, and other plan fiduciaries.
• Since employers are required to distribute SPDs to plan participants within a certain timeframe, failure to do so can result in significant penalties if it's discovered by through an audit, investigation of an ERISA complaint, or as a result of a lawsuit filed by a disgruntled employee. Employers should be aware that discovery of a SPD failure could trigger a larger plan audit by the Department of Labor (DOL), which could result in additional penalties for noncompliance.
• Employers who do not have an SPD may face the following penalties:
  • $110 per day per participant for failure to provide an SPD or plan document within 30 days of request.
  • $184 per day [1] (not to exceed $1,846 per request) for failure to provide the DOL any requested information relating to the employee benefit plan.

What is recommended in order to stay compliant with ERISA requirements?

• Create a "wrap" document that includes information on the rights of the participants, as well as the plan's operations and administration. A wrap document "wraps" around the insurance policy, coverage certificate or plan booklet. The benefits available under the plan continue to be governed by the insurance policy, coverage certificate or plan booklet, while the wrap document supplements with the information necessary to comply with ERISA. In effect, the wrap document fills the gaps left by insurance carriers and third-party administrators. It acts as a companion to insurance certificates and/or booklets and, together, they satisfy ERISA's plan document and SPD requirement.
• The advantages of using a wrap document to meet the document and SPD requirements is that the employer only has one document and SPD to maintain for compliance updates. ERISA generally requires that employers distribute a new wrap document once every 5 years, or as your benefit options change.