Did you know the Employee Benefits Security Administration (EBSA) has authority over 2.5 million health plans and nearly 673,000 other welfare benefit plans? Overall, they oversee $12 trillion in assets belonging to over 150 million employees. If you're offering health benefits to your employees, these numbers should grab your attention.
The Employee Retirement Income Security Act (ERISA) of 1974 may sound like a relic of the past, but it remains a relevant influence that shapes employee benefits today. No matter if you're a small business owner or a large corporation, understanding ERISA and what it means to your company will help avoid costly penalties and legal troubles.
This guide will erase any misconceptions about ERISA health plans, explore why compliance matters, and provide actionable advice to keep your business on the right side of the law.
Understanding ERISA Health Plans
Let’s start with the basics first: ERISA health plans are employee benefit plans subject to federal rules that protect the interests of their participants. These plans can include many health and welfare benefits, including:
Group health insurance
Dental and vision coverage
Group term life insurance
Healthcare flexible spending accounts (FSAs)
It's important to mention that ERISA guidelines apply to most employers, regardless of their size. Of course, there are a few exceptions, including government plans involving teachers, law enforcement, military members, and employees of federal and state agencies. Church-sponsored plans are usually exempt from ERISA as well as voluntary plans where the employer doesn’t contribute at all.
So, aside from extremely rare cases, whether you have a small business with just a few employees or run a corporate office of 1,000 or more, you are almost certainly subject to ERISA compliance requirements.
Why ERISA Plan Document Requirements Matter
One of the fundamental compliance obligations for ERISA health plans is maintaining proper plan documentation. Many employers mistakenly believe that insurance certificates or brochures provided by insurance carriers will help them meet ERISA requirements. This is a common misconception and the mistake can cost you and your clients dearly.
As a benefits consultant, you need to understand the ERISA plan requirements because they are relevant to your responsibilities and necessary for client interactions. Yet the requirements have a deeper meaning for other vital reasons, such as:
Fiduciary Responsibility: As benefits consultants, you will work with plan managers to establish proper documentation for handling trust-based duties.
Clear Communication: Well-drafted plan documents act as a compass to guide those responsible for plan management. They help prevent misunderstandings and disputes by carefully outlining plan terms, benefits, and procedures.
Hold Sponsors Accountable: ERISA's documentation requirements enforce accountability, set minimum standards, and ensure that employers explain health benefits to employees.
Shows Audit Readiness: If there is a DOL or IRS audit, having compliant plan documents available can make the process more manageable. Showing proper audit readiness also demonstrates good faith.
Better Client Service: As benefits consultants, your ability to guide clients through ERISA compliance reveals your knowledge and value. Focusing your efforts on better client service will also strengthen your client relationships.
Strategies For Better Compliance and Avoiding Penalties
Recent attention on health plans and the recent recovery of nearly $1.5 billion by the Employee Benefits Security Administration (EBSA) reveals the gaps in compliance that still plague these companies. Over half of the recovery came from enforcement actions and about a third from informal resolutions. The need for the EBSA to step in suggests that strategies for better ERISA compliance are more important than we realize.
Here are some key strategies that establish a framework for compliance:
More Timely Distributions: Provide Summary Plan Descriptions (SPDs) to plan participants within 90 days of the start of their plan participation or within 30 days upon request to avoid financial penalties.
Timely Updates: Dedicate more staff to efforts that review and update your ERISA plan documents and SPDs when required based on any change in benefits or legal requirements.
Broad Coverage: Your wrap document should cover all ERISA-covered benefits, including voluntary plans that may be overlooked.
Accurate Reporting: Use wrap plans to simplify Form 5500 filing obligations by combining benefits under one ERISA plan number.
Dedicated Document Retention: Implement a solid record-keeping system to maintain all required ERISA documentation.
Building Trust With Your Clients
As a benefits consultant, everything you do should work toward building trust with your clients. Demonstrating your knowledge about ERISA compliance is only one step to solidify your client’s undying trust. You can offer innovative solutions that address ERISA plan document requirements and use wrap documents.
If you want to position yourself as a valuable partner in the compliance landscape, you should be translating the ERISA requirements into an easy-to-follow guide. Brokers or employers need a well-defined resource that shows them where they are going and how to get there.
Relieve Your Client’s Health Plan Burdens With Cutting-Edge Solutions
Employers are constantly burdened by benefits compliance, and they need something to help with that burden. Our focus at BCS is creating processes, tools, and solutions for employers when they need it.
As expert benefits consultants you need to trust that who you work will provide the best, most accurate compliance assistance for your employer groups. With ERISA compliance, this starts with the Wrap document. Take control of your compliance management today with our user-friendly, self-service solution.
Streamline your processes and automate complex tasks; you'll save time, reduce errors, and ensure organizational compliance even with ever-changing regulations.
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