ISSUED 1/25/21


TABLE OF CONTENTS

What is ERISA and what plans are subject to ERISA?

 

The Employee Retirement Income  Security Act of 1974 (ERISA) is a federal law that sets minimum standards for most voluntarily established pension and health plans in private industry to provide protection for individuals in these plans.  ERISA applies to both retirement and health and welfare plans.  With health and welfare plans,  ERISA applies to any plan that is a “group health plan”  that provides medical care.  Examples of plans that  are subject to ERISA include, but are not limited to:

• Medical/Surgical/Hospital

 

• Dental

 

• Vision

 

• Life/AD&D

 

• Short Term Disability

 

• Long Term Disability

 

• Health  Flexible Spending Account

 

• Health  Reimbursement Arrangement

 

• Pre-Paid  Legal

 

• Certain  wellness  programs, employee assistance programs, on-site  clinics, and telemedicine programs

 

What plans are exempt from ERISA?

 

Church and governmental plans are not subject to ERISA. Additionally,  other benefits and programs, such as workers’ compensation, unemployment compensation, state-mandated disability,  plans maintained outside of the U.S. for non-resident aliens, and payroll practices are exempt from ERISA.


There are certain group health plans that would be subject to ERISA but may qualify for the voluntary plan safe harbor. If a plan meets the voluntary plan safe harbor requirements, then despite being a group health plan, it will not be subject to ERISA.

 

Voluntary benefits are generally exempt if:

 

• No employer or employer organization contributions

 

• Participation is completely voluntary

 

• No employer consideration, except for reasonable compensation for administration of the plan

 

• No employer endorsement of the plan

 

For most employers, whether or not the plan meets the voluntary plan safe harbor will hinge on whether or not the employer endorses the plan. Examples of employer endorsement include, but are not limited to:

 

• Allowing employee premiums through the cafeteria plan

 

• Assisting employees with claim filing

 

• Listing the plan(s) among the employer’s other

benefits

 

• Including  the employer’s logo on plan materials

 

• Negotiating plan terms  or design

 

• Urging or encouraging employee participation


What are the pros and cons of being subject to ERISA?

 

ERISA requires plans  to provide participants with:

 

•  Plan information including important information about plan features and funding

 

• Provides  fiduciary responsibilities for those who manage and control  plan assets

 

• Requires plans to establish a grievance and appeals process for participants to get  benefits from their plans

 

•  Gives participants the right to sue for benefits 

and breaches of fiduciary duty

 

In addition to offering certain protections for plan participants, ERISA also provides some employer protections. ERISA preempts state law – meaning that  ERISA will supersede any and all State laws insofar as they relate to any employee benefit

plan. This is beneficial for most employers because it relieves the possibility of multi-state litigation of its ERISA benefits. Under ERISA, plan participants also have no right to a jury trial or punitive damages in litigation.

 

Does any employer offering health and welfare benefits need to file a Form  5500, regardless of size?

 

Generally, all group health plans subject to ERISA must file a Form 5500 annually no later than  seven months after the end  of the plan year, unless

the welfare benefit plan covered fewer than  100

participants as of the beginning of the plan year and is unfunded, fully insured, or a combination of insured and unfunded.

 

Does any employer offering health and welfare benefits need a plan document and summary plan description (SPD), regardless of size?

 

ERISA §402 requires that  every welfare plan (regardless of size) “be  established and maintained pursuant to a written instrument.”

 

Are the documents from the carrier/TPA, such as a certificate of coverage, sufficient to satisfy the ERISA plan document and SPD requirements?

 

While the certificate of coverage and other benefit communications from the carrier/TPA are beneficial resources, they often do not satisfy all of the requirements necessary to comply with the ERISA disclosure rules. Often, the carrier/TPA documents lack enough to detail to effectively communicate important details to plan participants, such as when you are eligible, when coverage terminates, and who is the plan fiduciary or agent for service of legal process. For that reason, most plan sponsors need a “wrap” plan document and SPD that can fill the gaps in missing information need to satisfy the ERISA requirements.

 

What is a “wrap” plan and is it better than having individual ERISA plans?

 

ERISA permits plan sponsors to “wrap” multiple benefits into one plan. Many employers find this practice beneficial because it allows the employer to file one  Form 5500 and distribute one  Summary Plan Description for all of its ERISA plans.  However, for certain employers, they must balance the desire for administrative ease with compliance obligations under other laws, such as HIPAA. For employers with a combination of fully-insured and self-insured benefits, they should carefully consider their options as wrapping all benefits into one plan may subject their fully-insured plans to more robust HIPAA compliance requirements.

 

When does the employer have to distribute the plan document and summary plan description (SPD)?

 

ERISA requires plan administrators to provide plan participants a plan document upon request within 30 days, free-of-charge or for copying fees. ERISA requires plan administrators to provide

plan participants a summary plan description automatically within 90 days of the participant becoming eligible for the plan.

 

Can an employer distribute the SPD electronically via email or its intranet?

 

An employer is permitted to distribute the SPD electronically to any plan participants who use a computer as an integral part  of their job duties and any non-computer access employees who consents to receive the SPD electronically so long as the following conditions are met:

 

Voluntary Provision of E-mail Address

 

Participants and beneficiaries entitled to receive information must voluntarily provide the employer, plan sponsor, or plan administrator (or its

designee) with an e-mail address for the purpose of receiving disclosures required.


 

Initial Notice

 

The Initial Notice  must be clear and conspicuous, provided contemporaneously and in the same medium as the request for the e-mail address, and contain the following information:

 

• A statement that providing an e-mail address for the receipt of the required disclosures is entirely voluntary, and that as the result of providing the

e-mail address, the required disclosures will be made electronically

 

•  Identification or a brief description of the information that will be furnished electronically and how it can be accessed by participants and beneficiaries

 

• A statement that the participant or beneficiary has the right to request and obtain, free of charge, a paper copy of any of the information provided electronically and an explanation of how to exercise that right

 

•  A statement that the participant or beneficiary 

has the right, at any time, to opt-out of receiving

the information electronically and an explanation of how to exercise that right

 

• An explanation of the procedure for updating

the participant’s or beneficiary’s e-mail address

 

Delivery

 

The plan administrator takes  appropriate and necessary measures reasonably calculated to ensure that  the electronic delivery system  results in actual  receipt of transmitted information (e.g., using return-receipt or notice of undelivered electronic mail features, conducting periodic

reviews or surveys to confirm receipt of transmitted

information, etc.).
 

Confidentiality

 

The plan administrator takes appropriate and necessary measures reasonably calculated to ensure that the electronic delivery system protects the confidentiality of personal information.

 

Calculated  To Be Understood

 

Notices furnished to participants and beneficiaries shall be written in a manner calculated to be understood by the average plan participant.

 

Are there special requirements for employers with non-English speaking employees?

 

Where a summary plan description in English would fail to inform certain non-English speaking participants adequately of their rights and obligations under the plan, the plan administrator must provide these participants with an English-language summary plan description which prominently displays a

notice, in the non-English language common to these participants, offering them assistance. This requirement applies to a plan that:

 

• Covers fewer than 100 participants at the beginning of a plan year, and in which 25 percent or more  of all plan participants are literate only in the same  non-English language, or

 

• Covers 100 or more  participants at the beginning of the plan year, and in which the lesser  of (i) 500

or more  participants, or (ii) 10% or more  of all plan participants are literate only in the same  non- English language

 

What happens if we do not have a plan document or summary plan description?

 

Failure to provide a plan participant with a plan document within a timely manner will result in a penalty of $110 per day beginning on the 31st day after the request is made. There are no specific penalties for failure to prepare a required SPD. However, participants and beneficiaries may bring suit to enforce the requirement. Failure to provide to DOL upon request, $161 per day, capped at $1,613 per request. Criminal penalties may be imposed on any individual or entity that willfully violates any requirement of Title I of ERISA, including disclosure rules. The penalty per conviction could be $100,000 or imprisonment for up to 10 years. Fine can be increased up to

$500,000 if against an entity.

 

What happens if we have not filed a Form 5500?

 

A penalty of up to $2,233 a day— or higher amount if adjusted pursuant to the Federal Civil Penalties Inflation Adjustment Act of 1990, as amended—may be assessed for each day a plan administrator fails or refuses to file a complete

and accurate report. However, plan administrators are eligible to pay reduced civil penalties under the Delinquent Filer Voluntary Compliance Program if the required filings under the DFVCP are made prior to the date on which the administrator is notified in writing by the Department of Labor of a failure to file a timely annual report. In the case of a DFVCP submission relating to more than one delinquent filing for the same plan, the maximum penalty amount is

$2,000 for each annual report, not to exceed

$4,000 per plan.