ERISA
If your organization offers a health and welfare plan, you may need to comply with ERISA.
A wrap document is a tool to maintain compliance with ERISA rules related to plan documents and summary plan descriptions.
What Is the Employee Retirement Income Security Act (ERISA)?
ERISA (Employee Retirement Income Security Act) is a federal law that was tasked in 1974. It was intended to provide protection for the health and welfare retirement benefits for American workers. The complex requirements include detailed disclosure and reporting requirements in addition to outlining the fiduciary responsibility of plan sponsors.
How Does ERISA Work?
ERISA establishes the minimum requirements for retirement and healthcare plans to help protect workers and plan beneficiaries. While it’s not required for employers to offer their employees plans, it does set the standards if they do.
Some of the areas the ERISA law sets standards for employers and plan administrators include:
- Reporting: Plan administrators are held accountable through annual reporting
- Protection: The law lays out how assets in retirement plans are protected and how grievances can be addressed
- Plan participation: There are anti-discrimination regulations in place that help protect all plan participants
- Fiduciary standards: Ensuring plan administrators act in employees’ best interests, not their own
- Information disclosures: All participants must be provided standardized information about their plans
What is a wrap document?
A wrap document is a tool to maintain compliance with rules related to plan documents and summary plan descriptions (SPD). Specifically, ERISA requires all ERISA plans to:
- Have a written plan document
- Distribute SPDs to plan participants
The plan document and SPD rules have specific content requirements that usually are not included in the standard documents that an employer receives from insurance carriers. In addition, a plan document should have several legal protections (e.g., discretionary authority, the ability to amend or terminate the plan) as well as identify who the plan administrator and plan fiduciary are. The standard benefits-at-a-glance or insurance certificate will rarely satisfy these requirements.
What benefit plans are subject to ERISA?
ERISA applies to two types of plans “Employee Welfare Benefit Plans” and “Employee Pension Benefit Plans”.
A welfare plan is a plan offered by an employer or employee organization that provides medical care to their participants through insurance or reimbursement. Which can include:
- Health Insurance
- Dental & Vision Insurance
- Group Life Insurance
- Long Term Disability Income
- Accident Insurance
- Wellness Programs that offer medical care
- Worksite Benefits offered through a Section 125 plan
- Employee Assistance Plans (EAPs) that offer medical care
A pension plan is any plan, program, or fund offered by an employer that provides retirement income or deferral of income including:
- Profit-Sharing
- Stock Bonus Plans
- Money Purchase Plans
- 401(k) Plans
- Employee Stock Ownership
- Defined Benefit Retirement Plans
Not all plans are protected by ERISA, some examples of are pension or health plans provided by:
- Federal Government
- State or Local Governments
- Indian Tribal Entities
- Churches
All ERISA-covered health and welfare plans that are funded through a trust must file Form 5500, no matter how many participants are in the plan. Also, health and welfare plans that are unfunded/self-insured or insured must file if they have 100 or more participants at the start of the plan year.
The Bottom Line on ERISA
While you don't need an ERISA expert, it's important to understand the law and the protection it offers plan participants and what plan sponsors need to do to stay compliant. Luckily isolved can help with your health and welfare plan ERISA compliance. Contact our sales team to see how we can help you stay compliant with ERISA.
Stay informed about the latest ERISA regulations to minimize penalties and risks. Click here to access our ERISA Questionnaire FAQs.