The Employee Retirement Income Security Act (ERISA) is a federal law protecting health plan participants through a set of minimum requirements for those plans. The requirements outlined include plan documentation, summary plan descriptions, Form 5500, summary annual plan reports, and fiduciary requirements. These requirements are regulated by the Department of Labor (DOL) and the Employee Benefits Security Administration (EBSA).
It’s important to familiarize yourself with these requirements to remain compliant. Otherwise, business owners may be subject to legal action, penalties, and lawsuits.
When offering benefits plans, ensure ERISA compliance by following these tips.
1. Provide a physical copy of coverage
Employers need to receive a master copy of the coverage documents from the insurance carrier. This document should include named fiduciaries, allocation of responsibilities, benefit payment, claims procedures, portability, special enrollment and nondiscrimination provisions, and privacy of health information. Most times, insurance companies are drafting their documents to adhere to state insurance laws. This means, employers need to pay special attention to these documents and whether they satisfy ERISA requirements. If the insurance carrier’s documentation does not include any of these points, the employer must create a separate document or a “wrap” document which supplements what the carrier provides to include all of this information.
If there is a request by a participant to receive a copy, a return of the copied documents must occur within 30 days of the request. It is best to keep a record of these requests and the responses to them.
2. Supply a plan summary and updates
Once an employee becomes a participant in your plan, they should receive the Summary Plan Description (SPD). This allows the plan participant to review their benefits and rights. The SPD should include:
- Cost-sharing provisions (premium, deductible, co-insurance, etc.)
- List of covered preventative services
- List of covered existing and new drugs
- Covered medical tests, devices, and procedures
- In-network vs. out-of-network benefits
- Pre-authorization requirements
Participants should also receive any updated changes to any of these plan details throughout its lifetime in a Summary of Material Modifications. All information that a participant receives should be easy to understand and follow.
3. Report on time
Employers are also required to submit annual 5500 reports to the DOL to report financial and other information about the plan. There are some group health plans that are generally exempt from this requirement including those with fewer than 100 participants, unfunded group health plans, or those sponsored by churches or the government.
Check out this complete guideline resource for employers is provided by EBSA.
4. Make investment options clear
If there are investment options within the plan, make participants fully aware of all choices before they invest. Plan participants should know the benefits and risks associated with the investment. Plan participants should always know where their money is going and when.
Not only is ERISA compliance helpful in avoiding lofty fees and penalties, but also gives you employees confidence in a protected benefits plan. Benefits compliance can seem overwhelming, especially when you do not have an in-house expert aware of how and when to fulfill these requirements. Because of the complexity of benefits plans, many business owners opt to outsource the administration of them to a vendor or a Professional Employer Organization (PEO). Benefits Solutions Group, a member of the Tandem Family of Companies, assists hundreds of businesses with compliant benefits solutions.
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