What is ERISA Compliance?

ERISA compliance refers to the federal requirements employers must follow to offer welfare and retirement programs. Companies that offer benefit packages to their employees are regulated by ERISA (Employee Retirement Income Security ACT), and maintaining compliance with these guidelines is a federal requirement.

The goal of ERISA is to protect employees from being negatively impacted by retirement plans and company-provided welfare programs like dental, optical, and disability insurance. The law requires that employers abide by specific administration guidelines to ensure that all individuals are completely aware of their options and the processes of utilizing the benefits.

All private institutions that offer things like retirement plans or health insurance must meet ERISA stipulations. Two types of organizations that aren’t governed by these rules are churches and government entities.

Compliance With ERISA

There are a variety of benefit programs shielded by the protections set forth under ERISA. Examples include:

  • Medical Insurance
  • Sick Leave
  • Disability Coverage
  • Unemployment Benefits
  • Paid Time Off
  • Training Programs
  • Daycare Assistance
  • Scholarship Funds
  • Holiday Pay
  • Retirement Plans

There are some exemptions to the law. The DOL has outlined two areas that don’t fall under the ERISA regulations: payroll practices and non-required plans.

These rules can be confusing to contractors and partnerships. As long as the only people involved in the business are part or sole owners, they aren’t required to maintain ERISA compliance. However, many types of these plans qualify for tax deductions, so the individual or unit need to make sure they follow the Internal Revenue Services rules to receive the benefits.

Administrative Requirements Under ERISA

One of the basic administrative requirements of ERISA is that there are designated individuals or teams that ensure that all of the programs meet the specified stipulations. The purpose of this is to minimize employee responsibility in regards to tracking down and verifying the information of each plan, and it also creates a transparency. Independent contractors can utilize their insurance company as the administrator to meet this requirement.

ERISA is composed of three main compliance sections: disclosure, paying claims, and reporting. Each of these sections includes their own regulations, which are as follows:

  • Disclosure: The designated administrators of each program are required to provide all of the pertinent information of the plan to their employees. This includes outlining types of coverages and the various levels available as well as necessary financial reports and statements. If the DOL requests documentation regarding such programs, the company is required to send it to them.

  • Paying Claims: Each welfare program provided by an employer must be accompanied with a claims process. Not only is this information to be provided to the employee, but if a denial has been attached to a claim, they also need to receive a thorough explanation.

  • Reporting: Along with providing requested information, companies must also routinely file documentation with the DOL. This usually consists of explanations of the plan that are in place as well as the various coverage types within each program. Such information must also be filed when the business increases and decreases levels of coverage for various programs.

All private entities that provide benefits to their employees must comply with all three sections of ERISA requirements.

Benefit Plan Requirements

The federal government also places stipulations on the different types of sub-categories and their benefits. These are broken into two sections: welfare plans and retirement plans.

For welfare plans, companies must provide all insurance contracts to their employees enrolled in the plan. The easiest way to do this is to include the information during new hire training or orientation.

Retirement plans typically face stricter requirements than welfare plans. ERISA stipulates that employers and programs must meet the following stipulations:

  • Information pertaining to the plans must be easily accessible to participants;
  • Documentation should be sent directly to the employee as well as be present at the office;
  • The company must provide a thorough explanation to its employees regarding how to claim benefits;
  • The retirement plan needs to showcase diversification to prevent a substantial loss of funds.

To maintain ERISA compliance, the employer also needs to provide employers with routine financial documentation regarding their funds and any growth or loss that’s occurred.

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