The Employee Retirement Income Security Act (ERISA) of 1974 is a U.S. federal tax and labor law established to protect the interests of employee benefit plan participants and their beneficiaries. ERISA plans account for a large U.S. market of employer-sponsored health plans that are regulated under the Act.
What Is ERISA?
ERISA sets standards for health, retirement and other welfare benefit plans, including disability insurance, life insurance and apprenticeship plans. The Act establishes standards of conduct for fiduciaries and includes enforcement provisions to ensure that plan funds are protected and that all qualifying participants receive their entitled benefits.
ERISA was created to prevent the abuse or mismanagement of employee retirement savings. It holds those responsible for these savings to a high standard and enforces rules that ensure that they act in the best interest of the plan participants. ERISA is administered and enforced by the Pension Benefit Guaranty Corporation, the Internal Revenue Service and the Labor Department’s Employee Benefits Security Administration.
What Does ERISA Regulate?
Under ERISA, employers are not required to provide employees with a benefits plan. However, businesses that offer such plans must ensure that they are managed in compliance with the provisions mandated under ERISA. These provisions include:
- Conduct – ERISA regulates the conduct for managed care, such as HMOs, and other fiduciaries.
- Disclosures – Businesses are responsible for providing plan participants with certain disclosures, such as a written plan summary that lists the benefits offered, the plan’s limitations, the rules for acquiring the benefits and other guidelines.
- Reporting – ERISA required detailed reporting to the federal government.
- Procedural Safeguards – Businesses must develop a written policy that outlines how to file claims, along with the written claims appeal process if a claim is denied.
- Best Interest Protection – ERISA prohibits discriminatory practices and ensures that plan funds are delivered in the plan participants best interest.
What is the ERISA Annual Report Requirement?
Plan administrators of ERISA plans are required to file an annual report with the Department of Labor unless an exemption applies. IRS Form 5500 is used to provide the DOL with specified plan information, including details about a 401(k) plan’s financial conditions, operations and investments. All retirement plans, including profit-sharing plans, must have a completed Form 5500 each year. Also, for benefits plans such as health, dental, and vision, a Form 5500 is required if either at least 100 participants were enrolled in the plan at the beginning of the plan year or if the plan is self-funded.
ERISA Minimum Requirements On Employer-Sponsored Health Plans
There are more than 2.2 million employer-sponsored health plans covered by ERISA in the U.S., according to the DOL. Approximately 40 percent are covered under a fully-insured ERISA plan, while the remaining 60 percent are covered by a self-funded ERISA plan. Businesses that offer ERISA plans must meet the minimum requirements imposed by ERISA on employer-sponsored health plans.
Plan Document Requirements
ERISA plan document requirements refer to a rule that ERISA health plans must be administered with a written plan document that includes information such as the names of fiduciaries, how benefits are paid, plan administration and operation, benefits appeals and procedures for processing benefits claims. These plan documents must comply with nondiscrimination rules, certificates of coverage, DOL regulations and special enrollment rights. The plan document must also specify how the plan will protect the healthcare privacy of plan participants and their beneficiaries.
Summary Plan Description Requirements
Under ERISA, plan administrators are required to provide plan participants and beneficiaries with a written summary plan description (SPD) in terms that are easy to understand. The SPD should accurately and clearly describe all health plan benefits, details about the provider networks, and cost-sharing provisions like deductibles, premiums, copayments, coinsurance and other expenses that the plan participant or beneficiary will be responsible for paying.
Reporting And Fiduciary Requirements
Plan administrators are also responsible for certain ERISA reporting and fiduciary requirements. Each year, ERISA requires the reporting of financial and other relevant information to plan participants and the Department of Labor.
Fiduciary requirements refer to the set of rules and standards that ERISA sets to govern the conduct of any individuals who exercise control or authority over the management of an employee benefits plan. Fiduciaries must also add prudently and diversify the plan’s investments in an attempt to minimize the risk of large losses. They should avoid any conflicts of interest.
Talk with New City Insurance About What Is Considered An ERISA Plan
Employers who contribute to a retirement or health plan are subject to the rules of ERISA. An employer-sponsored health plan that takes salary deductions from employees or contributions by an employer is considered an ERISA-qualified plan.
However, ERISA does not generally cover group health plans that are established or maintained by religious institutions or government organizations. In addition, individual retirement plans are not generally covered by ERISA, although some exceptions do exist. To learn more about what is considered an ERISA plan or to speak with an experienced agent about acquiring an ERISA plan, reach out to the insurance experts at New City Insurance today.