What Is ERISA (and What Are ERISA Employee Benefits?)

The Employee Retirement Income Security Act (ERISA), which regulates most employee benefit plans, can be one of the biggest monsters in the nightmares of HR professionals. With four titles and oversight from three different federal agencies, ensuring that your company's employee benefit plans comply with all ERISA regulations can be scary, even for seasoned HR leaders.

Of course, HR pros should be able to turn to their employee benefits brokers for support in staying compliant with ERISA requirements. Still, it's important to understand the basics of ERISA and know which employee benefits are covered under its jurisdiction.

Let's go over some of the most important ERISA employee benefits to help dispel those nightmares once and for all.

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What is ERISA?

ERISA, aka the Employee Retirement Income Security Act, is an important piece of legislation impacting employee benefits. It was put in place to protect the retirement and health benefits of people employed in private industries.

This legislation sets baseline standards for pension and healthcare plans, ensuring employers fulfil their duties and transparently handle these benefits.

By providing essential protections, ERISA makes sure employees get the retirement and health benefits they earned, so they can enjoy financial security and peace of mind in their golden years.

It was signed into law in 1974 to prevent the misuse of employee benefit plan assets. Though initially meant to address underfunded and poorly-managed pension funds, ERISA's scope now includes defined contribution plans like 401(k)s and profit-sharing plans, certain health insurance plans, disability insurance, life insurance, and more.

If you're a human resources professional, you must stay on top of your company's employee benefits plans to ensure they're ERISA-compliant. Not all employee plans must comply with ERISA, but those that are will have strict transparency and fiduciary requirements. This includes creating additional employee documents, providing financial reports to the Department of Labor (DOL), filing additional forms, and more.

What does ERISA cover?

ERISA covers most defined benefit plans, defined contribution, and welfare plans offered by private employers, such as:

• Corporations
• Partnerships
• Sole proprietorships
• Nonprofit organizations

If an employee benefit plan falls under ERISA, the plan administrators have to follow specific guidelines for transparency and to make sure they act in the best interest of plan beneficiaries.

For example, plan administrators must provide employees with detailed information on the ins and outs of the plans, including all benefits, associated fees, and any changes to their plans' terms.

Additionally, plan administrators must file a Form 5500 every year with the federal government, which includes information about the plan's compliance and performance. While employees are welcome to review this form to stay updated on the financial health of their plan, these forms are mainly for the government to collect data and ensure that benefit plans are being managed in the best interest of employees.

What is an employee benefit plan under ERISA?

ERISA applies to several employee benefit plans, including defined benefit plans like pensions and defined contribution plans like 401(k)s. It also includes employee benefits other than retirement plans, like life insurance and other benefits offered by the employer.

Some of the most common employee benefit plans subject to ERISA include:

• Pension plans
• 401(k) plans
• 403(b) plans
• Deferred compensation plans
• Profit-sharing plans
• Health insurance plans, including medical, dental, and vision
• Life insurance
• Long-term disability insurance
• Accident benefits plans
• Funded vacation benefits
• Funded apprenticeship benefits
• Wellness plans

In short, most employer-sponsored benefit plans qualify under ERISA if the employer isn't a government entity or a religious organization.

How does ERISA affect health insurance?

Any health insurance plan that falls under ERISA is subject to strict transparency and fiduciary regulations. These guidelines ensure plan beneficiaries have access to relevant information about their plan and that the DOL has access to reports on the plans' financial status.

Healthcare plan administrators must provide the following information to all plan beneficiaries:

• Summary of plan with easy-to-read terms
• A detailed description of all health benefits
• Coverage eligibility
• Clear and complete disclosure of all costs associated with the plan, including copays, premiums, and deductibles
• Network information

ERISA plan administrators must also submit an annual financial report to the DOL to prove they are following ERISA fiduciary requirements and managing the healthcare plan in the best interest of plan beneficiaries.

ERISA is designed to make health plans more employee-friendly. That's why ERISA employee benefit plans are the most common type of private health insurance plan. According to the DOL, ERISA health insurance plans had approximately 139 million participants and beneficiaries in 2018 versus 136 million in 2015.

What employee benefit plans are not subject to ERISA?

Most employee benefit plans fall under ERISA, but there are a few common types of plans that don't:

• Plans offered by state or federal government
• Plans offered by churches or religious organizations to their employees (unless the church opts in to ERISA)
• Plans maintained only to comply with state requirements, including unemployment compensation, workers' compensation, and disability insurance
• Plans offered by Indian tribal entities, as long as they don't perform commercial activities
• Plans outside the United States for nonresident aliens

Certain plans can also be excluded from ERISA guidelines under the "payroll practice" exemption, which protects certain health and welfare payments from ERISA laws when they are part of the employer's regular payroll practices.

For example, this exemption may exclude wages, holiday pay, and paid sick days from ERISA. Some voluntary insurance policies that allow employees to make payments via payroll deductions may also qualify under this exemption.

How do benefits brokers help employers stay compliant with ERISA?

Your benefits broker should help ensure your company's employee benefit plans stay compliant with ERISA. As licensed insurance professionals, benefits brokers should know ERISA regulations like the back of their hands.

Your benefits broker should help by:

• Creating custom employee healthcare packages that suit your company's needs while meeting ERISA requirements
• Staying up to date on compliance filings, including those for ERISA
• Automating employee benefit plans audits to proactively find and resolve problems
• Advising on which employee benefit plans fall under ERISA

Take back your time with an ERISA benefits broker

Dealing with ERISA compliance can be one of the most time-consuming aspects of any HR professional's job. After all, this is a comprehensive federal law that spans four titles and over 500 pages, making it entirely too long and complicated for even the biggest HR superstar to tackle on their own.

Nava manages all things employee benefits – including compliance – for hundreds of growing businesses. If you're tired of stressing over ERISA compliance, schedule a call with a Nava Benefits expert.