What Is an ERISA Plan? Understanding Employer Obligations and Compliance Risks
The term “ERISA plan” is commonly used in discussions about employee benefits, but it’s important to note that the Employee Retirement Income Security Act of 1974 (ERISA) governs the administration of employee benefit plans rather than creating specific plans itself. Therefore, while it’s not technically accurate to refer to an “ERISA plan,” the phrase is widely used to describe benefit plans subject to ERISA’s provisions. More accurately, we’ll provide a general overview on which plans are subject to ERISA, its requirements, and why it’s so important to maintain compliance. ERISA applies to most private-sector employer-sponsored benefit plans, including: However, ERISA does not cover plans established or maintained by governmental entities, churches for their employees, or plans maintained solely to comply with applicable workers’ compensation, unemployment, or disability laws. In the case of Kinsinger v. Smartcore, LLC, a health plan participant underwent a medically necessary hysterectomy, which had been preauthorized. However, post-surgery, the participant discovered that her medical bills were unpaid because the employer had failed to remit the withheld employee contributions to the health benefit program. Upon requesting the plan documents to understand her rights and the appeals process, the employer failed to provide them within the 30-day period mandated by ERISA. This delay led to a lawsuit, and the court imposed a penalty of $55 per day, totaling $41,000, for the failure to furnish the required documents in a timely manner. This case underscores the importance of adhering to ERISA’s disclosure requirements and the potential financial repercussions of non-compliance.1 (Hall Benefits Law, 2022) ERISA compliance is complex, but the risks of ignoring it are too costly to overlook. From Form 5500 filings to Wrap SPDs and participant notices, employers must stay ahead of evolving requirements to protect their business and their employees. Our ERISA compliance solution simplifies this process—ensuring your documentation is current, complete, and filed correctly. Whether you’re unsure where to start or need a partner to manage the details, we can help you avoid costly penalties and stay compliant with confidence. Request a proposal for BASIC ERISA Essentials today! SourcesWhich Plans Are Subject to ERISA?
Employer Responsibilities Under ERISA
Employers must furnish participants with important disclosures, including a Summary Plan Description (SPD), Summary of Material Modifications (SMMs), Summary Annual Report (SAR) upon eligibility for the plan outlined in the plan documents and when changes occur, and other notices informing employees of their rights and obligations under the plan.
Annual filings, such as Form 5500, employer plan sponsors are required to report plan information to the Department of Labor (DOL) and the IRS. The 5500 is generally required of plans with 100 or more participants on the first day of the ERISA plan year. Audited financial statements must also accompany the filing if benefits are held in a trust.
Employer Plan Sponsors are considered fiduciaries when they exercise discretion over plan management or assets. This means they must act solely in the best interests of plan participants, avoid conflicts of interest, and ensure prudent management of the plan.
Employers must ensure participants receive required notices, such as COBRA continuation coverage notices, HIPAA privacy notifications, and other model notices. Failure to provide these timely can result in hefty penalties.
Employers are responsible for maintaining detailed and accurate records of plan operations, participant contributions, and distributions. This documentation is critical for both audits and demonstrating compliance.Consequences of Non-Compliance
Don’t Risk Noncompliance
