BENEFITS PLAN COMPLIANCE

Employers that sponsor health, welfare and retirement benefits MUST be in compliance with ERISA requirements

WHAT IS ERISA

The Employee Retirement Income Security Act (ERISA) is a federal law that sets minimum standards for health and welfare plans, i.e,, group health plans and retirement plans.

Which Employers Are Subject to ERISA?

ERISA applies to virtually all private-sector employers that maintain welfare benefit plans for their employees, regardless of the size of the employer. This includes corporations, partnerships, limited liability companies, sole proprietorships and nonprofit organizations

What Are We Required to Do Under ERISA?

Among other things, ERISA generally imposes five key requirements on group health plans:

Plan Document Requirement
Summary Plan Description Requirement
Form 5500 Requirement
Summary Annual Report Requirement
Fiduciary Requirements

PLAN DOCUMENT REQUIREMENT

By law, all ERISA-covered benefit plans, including group health plans and other employee benefit plans, must be administered in accordance with a written plan document. ERISA generally requires a welfare plan document to contain the following provisions:

Named fiduciaries. The document must name one or more fiduciaries that have the authority to control and manage the operation and administration of the plan.
Allocation of responsibilities. The plan must include a procedure for allocating responsibilities for plan administration and operation.
Benefit payment. The plan must state the basis on which benefits are paid to and from the plan.
Claims procedures. The plan must have a specific procedure for processing benefit claims and appeals that complies with U.S. Department of Labor regulations.
Portability, special enrollment and nondiscrimination provisions. The plan must describe certificates of coverage, special enrollment rights and nondiscrimination rules.
Privacy of health information. Group health plans must contain plan language protecting the medical privacy of plan participants and beneficiaries.

It is recommended employers draft an entire plan document or create a “Wrap” plan document to meet ERISA’s requirements in addition to state requirements.

A “Wrap Plan” document is designed to meet plan documentation requirements under ERISA and other federal laws and to incorporate all other welfare plans, insurance contracts and other relevant documents into a single plan. These materials can be kept together for administrative ease.

Unless requested, the written plan document DOES NOT NEED TO BE furnished to employees.

SUMMARY PLAN DESCRIPTION REQUIREMENT

ERISA requires the administrator of an employee benefit plan to furnish participants and beneficiaries with a summary plan description (SPD). An SPD must describe:

Cost-sharing provisions, including premium, deductible, co-insurance and co-payment amounts for which the participant or beneficiary will be responsible.
The extent to which preventive services are covered under the plan.
Whether, and under what circumstances, existing and new drugs are covered under the plan.
Whether, and under what circumstances, coverage is provided for medical tests, devices and procedures.
Provisions governing the use of network providers; the composition of provider networks; and whether, and under what circumstances, coverage is provided for out-of-network services.
Provisions requiring pre-authorizations or utilization review as a condition to obtaining a benefit or service under the plan.

NOTE: Many employers wrongly assume that documents provided by an insurance company for fully insured products satisfy the SPD requirements.

Employers must draft an entire SPD or create a “wrap” SPD to meet ERISA’s requirements. A wrap SPD is designed to meet ERISA’s requirements by incorporating and supplementing documents provided by insurance companies. SPDs must be provided to plan participants within these deadlines:

Within 90 days after the employee becomes a participant in the plan.
Within 60 days of adopting a material reduction in covered services or benefits. A material reduction in covered services generally includes increases in premiums, deductibles, co-insurance amounts and co-payment amounts.
instead of a new SPD, employers can provide notice of a material reduction in covered services via a Summary of Material Reduction in Covered Services or Benefits document during the same time period.
No later than 210 days after the end of a plan year in which a material modification that is not a material reduction in covered services or benefits is adopted.
Material modifications include a change in carriers, eligibility requirements or participant contributions. Instead of a new SPD, employers can provide notice of a material modification via a Summary of Material Modifications document during the same time period.
Every five years if changes are made to SPD information or the plan and those changes are not material modifications or reductions in covered services or benefits.
Every 10 years if no changes are made to SPD information or the plan.

An SPD generally may be distributed electronically if the plan administrator takes steps to ensure that the system for furnishing documents results in actual receipt of the material. In order to provide materials electronically:

The administrator must ensure that the system protects the confidentiality of personal information relating to the individual’s accounts and benefits.
The electronically delivered documents must be prepared and furnished in a manner consistent with the style, format and content requirements applicable to the particular document.
Notice must be provided to each participant, beneficiary or other individual, at the time a document is furnished electronically, that informs the individual of the significance of the document and of the right to request and obtain a paper version of such document.
Upon request, the participant, beneficiary or other individual must be furnished with a paper version of the electronically furnished documents.

FORM 5500 & SUMMARY ANNUAL REPORT

FORM 5500 REQUIREMENT

ERISA generally requires group health plans to annually file a report with the U.S. Department of Labor that contains financial and other information about the plan. This filing is made via Form 5500 and must be filed electronically by July 31^st.

The following group health plans are generally exempt from the Form 5500 requirement:

Fully insured group health plans with fewer than 100 participants as of the beginning of the plan year.
Unfunded group health plans with fewer than 100 participants as of the beginning of the plan year. An unfunded group health plan has its benefits paid as needed directly from the general assets of the employer that sponsors the plan.
Group health plans sponsored by churches.
Group health plans sponsored by governments.

SUMMARY ANNUAL REPORT REQUIREMENT

Employers that are required to comply with the Form 5500 requirement must also provide each plan participant with a Summary Annual Report, which provides a narrative summary of the information in the Form 5500. The Summary Annual Report generally must be distributed annually within nine months after the end of the plan year.

FIDUCIARY REQUIREMENTS

A “fiduciary” under ERISA is any person who exercises discretionary authority or control over the management of a plan, or management or disposition of the assets of a plan. Among other things, fiduciaries must discharge their duties solely in the interest of plan participants and beneficiaries.

ERISA establishes minimum standards for retirement, health and other welfare benefit plans and sets the standards of conduct for fiduciaries; therefore, it is critical that employers understand their responsibilities under this law.

Fiduciaries are subject to standards of conduct because they act on behalf of participants in an employer-sponsored plan and their beneficiaries. Fiduciary responsibilities under an ERISA-covered plan include:

Acting solely in the interest of plan participants and their beneficiaries and with the exclusive purpose of providing benefits to them.
Carrying out their duties prudently.
Following the plan documents (unless inconsistent with ERISA).
Diversifying plan investments.
Paying only reasonable plan expenses.

The duty to act prudently is a key fiduciary responsibility and requires expertise in a variety of areas. Employers should ensure that persons entrusted with fiduciary duties have the professional knowledge to carry out those functions.

Following the terms of the plan document also is an important responsibility as the plan document is the foundation for plan operations. An employer must be familiar with its plan document and should periodically review it to ensure that it remains current.

The Department of Labor (DOL) publication Understanding Your Fiduciary Responsibilities Under a Group Health Plan provides helpful information for employers seeking more information about this topic. You may also wish to use their ERISA Fiduciary Advisor.

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MYERISA WRAP™

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Legally completed SPD/Wrap document (Health & Welfare plans)
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ERISA COMPLETE™