ERISA Explained
The Employee Retirement Income Security Act of 1974 (ERISA) is the federal law that establishes minimum standards for pension plans offered by employers in the private sector. ERISA created standards for participation in pension plans, as well as vesting, benefit accrual and funding standards for plans beginning in 1975 or later. It requires a copy of the plan to be furnished to all plan participants. ERISA also codified the basic legal premise that anyone exercising discretionary control over a pension plan has a fiduciary obligation to its participants. This is significant because ERISA allows plan participants to sue those in control of the plan if they breach this fiduciary obligation.
If you are a small business owner, CFO or HR professional in 2015, you need to be well-versed in your company’s ERISA obligations. The best way to fulfill your fiduciary duties is to comply strictly with ERISA’s recordkeeping, reporting and filing requirements, which can be cumbersome. ERISA’s basic compliance obligations include the following general requirements.
If you are an employer offering benefits to your employees, you must:
- Provide a written plan document for each plan you offer, including specific details, such as the Plan Number.
- Provide a Summary Plan Description (SPD) to each plan participant within 90 days of his or her enrollment.
- Provide each plan participant with a Summary of Material Modification (SMM) whenever there are material changes to the plan. This must be done within 210 days after the plan year-end for the year in which the modification occurred.
- File an IRS Form 5500, Annual Return/Report of Employee Benefit Plan. A short-form version is available for small businesses with fewer than 100 employees, and an EZ version is available for One-Participant (Owners and Their Spouses) Retirement Plans.
- Provide a Summary Annual Report (SAR) to plan participants by the mandatory deadline, which is 9 months after plan year end or 2 months after filing of the Form 5500.
The Patient Protection and Affordable Care Act (ACA) is another federal statute whose provisions overlap with ERISA in several areas. While ERISA was originally focused on employer-created pension plans, it has been expanded to encompass health care plans in certain circumstances. Retiree healthcare benefits are a prime example of benefits subject to both ACA and ERISA. While the ACA does not require you to provide health insurance benefits to employees, you may be subject to penalties if any full-time employees receive a tax credit through the healthcare exchange. ACA defines full-time employees as those who work 30 or more hours each week, tempting some employers to limit or reduce certain employees’ hours in order to eliminate them from this “pay or play” equation. These statutes are at odds here because this practice is arguably a violation of ERISA and other federal anti-discrimination statutes designed to protect employee rights.
Medical Loss Ratio (MLR) rebates are another point at which ERISA and ACA overlap. ACA requires some insurance companies to provide these rebates to employees, making them benefit plan assets which are further subject to ERISA regulation. As the employer you must be sure to include this in your benefit plan or SMMs, which should allow you to retain that portion of the rebate equal to the percentage of premium originally paid by the employer. For a comprehensive review of your ERISA rights and responsibilities, contact Sonus Benefits at www.www.sonusb.dev.
Article Sources
http://www.dol.gov/dol/topic/health-plans/erisa.htm http://www.hrknowledge.com/benefits/benefit-compliance/erisaedge/ http://ppaca.com/
http://www.irs.gov
http://moulderlaw.com/how-the-aca-erisa-510-and-flsa-18c-interact/
