Navigating Common Challenges of ERISA Plan Documents

Since 2020, many industries, including employee benefits, have dealt with disruptive challenges that transform the way businesses must operate to stay compliant. In some ways, the pandemic became a catalyst for faster change. Faster changes soon revealed disruptive challenges that make it more difficult for plan sponsors to maintain Employee Retirement Income Security Act (ERISA) compliance. 

As benefits brokers and advisors, understanding these challenges allows businesses to provide clients with the best resources. In this post, we will discuss three significant obstacles associated with ERISA plan documents that brokers need to remember moving forward. 

Three Key Issues of ERISA Plan Documents

Fiduciary Risks

One of the most pressing challenges in managing ERISA plan documents is the fiduciary risk involved. These entities are held to a high standard of conduct because they have a legal and ethical responsibility to make decisions in the best interest of plan participants. Any compliance misstep can lead to heavy penalties. 

For instance, failure to maintain accurate and up-to-date Summary Plan Descriptions (SPDs) after a fundamental plan change can lead to penalties. If the entity fails to keep the SPDs updated with current plan information, or if they distribute SPDs containing errors, they could be exposing themselves to significant fiduciary risk. This is because:

• Inaccurate or outdated SPDs can confuse participants about their benefits, potentially resulting in bad healthcare decisions.

• It may cause participants to miss out on benefits they're entitled to, leading to financial harm.

• The entity could face legal action from plan participants who relied on incorrect information.

• The Department of Labor could impose penalties for non-compliance with ERISA's disclosure requirements.

  
  

This example illustrates how critical it is for managing entities to maintain processes for updating all plan documents. Failure to do so represents a significant fiduciary risk that could have far-reaching consequences for the entity and the plan participants.

Lacking Resources to Comply with ERISA Requirements

Another significant challenge is the lack of resources to help plan sponsors comply with ERISA requirements. Many small to mid-sized companies do not have the in-house expertise or the financial capacity to hire external consultants. This can lead to compliance gaps, such as:

• Failing to update plan documents

• Not providing required disclosures to participants

  
  

Brokers can help clients manage the challenges associated with a lack of resources by recommending cost-effective solutions. A fitting example would be a self-service compliance tool that can help their clients stay on top of ERISA requirements without stressing an already resource-starved company.

Confusion on Required Documents

With the myriad of required documents for an employee benefits plan, it's very easy for employers to get confused. This can lead to inaccurate documentation creation, missed deadlines, missed distribution requirements, or complete failure to create the required documents in the first place.

Brokers should advise their clients on which documents are required in which situations, how they are distributed, what, if any, deadlines apply, and any other pertinent information the employer may be confused about. In addition, being able to point an employer to the right resources to help (or to provide those solutions for the employer), can go a long way in ensuring ERISA compliance.

Putting the Right Solutions in Place

Navigating the complexities of ERISA plan documents is no small feat, but as brokers, you have the power to make a significant difference for your clients. When you understand fiduciary risks, resource limitations, and can guide an employer through the confusion, you can confidently recommend resources to help your clients maintain compliance and reduce administrative burdens.

Benefits Compliance Solutions' cutting-edge solution for wrap documents is one of the best ways you can streamline compliance efforts and provide peace of mind. Don't let your clients face these challenges alone—empower them with the resources that help them effortlessly succeed.