As benefit brokers and advisers, youre likely aware of ERISA, or the Employee Retirement Income Security Act. But on the year of its 40th anniversary, as more U.S. Department of Labor auditors are out in the field than possibly ever before, why not make sure you refresh your ERISA knowledge to protect yourself and your clients?
This is the case that Elliot N. Dinkin, president and CEO of Pittsburgh-based Cowden Associates Inc., made to an audience of at least 100 brokers and advisers at the National Association of Health Underwriters annual convention in Scottsdale, Ariz. during a session on Monday.
While ERISA was initially passed to regulate pensions and many people associate it with that realm of the benefits universe, the law has become much broader over the course of its history since passing in 1974, Dinkin explained.
Now, Everything that looks and smells like a benefit plan is most likely covered under ERISA, he said, noting that even obscure benefits in the workplace are likely to fall under this law. Vacation benefits, funded scholarships, certain prepaid legal service arrangements this is because of the origin of ERISA with assets.
The general rule of thumb benefit professionals need to understand about the laws purpose is this: In general when we talk about ERISA, it sets minimum standards for most voluntarily established pension and health plans in the private industry to provide protection for individuals in these plans, according to Dinkin.
He also explained that while ERISA includes detailed requirements for what plan information should be disseminated to plan participants, and outlines what should be in the plan document, it doesnt definitively state what a plan document is. However, if you closely follow the guidelines for what should be in the plan document, for instance the names of fiduciaries, allocation of responsibility, funding policy, benefit payments, claims procedures, etc., you will likely be in compliance.
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What plans are not covered by ERISA?
Usually, the plans that are covered by ERISA fit this definition: A plan fund or program for the exclusive rights of the beneficiaries. While Dinkin explained that most benefit plans need to follow ERISA, there are some exceptions.
Governmental entities, church plans and unfunded excess benefit plans are some plans that arent governed by ERISA. However, as a benefit adviser you still have to file a form with the DOL noting that these plans will not be subject to ERISA, so theres still some work to be done with such plans.
Voluntary benefits, generally, are also not governed by ERISA because they are payroll entities, Dinkin explained. However, he says benefit advisers need to caution employers to ensure they do not endorse the benefits at all, or they could be deemed subject to the law. Be very careful in paperwork to distance the employer from the plan, he said.
While ERISA is very complicated and has sections related to COBRA governance, same-sex marriage benefits, self-funded clients and more, its important to remember Dinkin says we need to generally know what were doing or the process can be very punitive.
He added that 15,000 auditors have been hired by the DOL in the last year or so to get the nearly 75% of employer-sponsored plans that are subject to ERISA but not in compliance turned around. He noted he thinks the DOL is not out to make money off of these audits, despite the potential for $1,000-a-day penalties, the auditors generally want to help the employers that want to comply in good faith get corrected.
