If your company offers sponsored benefits to employees, particularly those that offer retirement or health benefits, you are likely subject to ERISA regulations. The Employee Retirement Income Securities Act (ERISA) sets the standard for how employer-sponsored plans must be administered. Failing to adhere to these regulations can have costly penalties for both the company and the individuals who have fiduciary responsibility to the plan.
This compliance guide can help your organization understand the ERISA requirements, what is needed to be in ERISA compliance and find the best professionals to support your organization throughout the process.
ERISA Regulations
ERISA dictates the minimum standard for benefit plans. These standards include what documentation is necessary for both the employer and the employee and to verify ERISA compliance to the government. Reporting requirements include:
- Documentation of the plan’s features as well as how the plan will be funded.
- Who is eligible to participate in the plan.
- The schedule for becoming fully vested in plans.
- Information on how benefits accrue.
- Statements of how the plan is to be managed, who can make changes to the plan and what authority is needed to cancel the plan.
- The process for claims as well as outlining the appeals process in the event that a claim is not approved.
- Detailing the participant’s right to file suit when the plan is not in compliance with the reporting requirements.
Nearly every benefit plan where the employer covers a portion of the cost falls under ERISA regulation. The exceptions are plans that are provided by religious institutions and government entities.
ERISA compliance is enforced through a number of penalties that may be levied against an organization, which includes daily fines. If an individual is deemed to have willfully disregarded ERISA requirements, they can be criminally liable and face fines of up to $100,000 and jail time of up to 10 years.
ERISA Compliance
There are a number of things your organization can do in order to be in ERISA compliance. The first is to have an understanding of the ERISA guidelines. Then, use a checklist, like the one below, to ensure that your organization is adhering to all requirements.
ERISA Checklist
Use the checklist below to benchmark your organization:
Plan Documentation
ERISA requires that all benefit plans have written documentation that summarizes the features of the plan as well as how the plan is funded. This document must be kept current and provided to participants within 30 days of their request.
Fidelity Bond
Fidelity bonds are necessary in order to help protect the plan against losses due to fiduciary violations. Bonds are required for every person that handles plan assets or has authority to make decisions on behalf of the plan. These bonds must be in place at the beginning of the plan year.
Summary Plan Description
The Summary Plan Description provides participants with detailed information regarding their benefit plans. Required information includes contact information for the company and the plan’s administrators.
The Summary Plan Description is a comprehensive document that should serve to answer a participant's questions on benefits, covered items, plan funding and the claims process. Additionally, the documentation must spell out a participant’s rights as provided by ERISA. This document must be provided to participants 90 days after they become eligible for participation or within 120 days of the first day of the plan.
Summary of Material Modification
If there are changes to a plan that are material, participants must be made aware of these changes. This documentation must be distributed to participants no later than 7 months after the end of the plan year where the changes took place.
Form 5500
Form 5500 is a government document that spells out the reporting that is necessary for documenting ERISA covered plans. This includes the plan’s financial information and an accountant’s statement, unless the plan is excluded by law. This document must be sent to the United States Employee Benefits Security Administration within the first seven months after the close of the plan year.
Summary Annual Report (SAR)
SAR provides a summary of the plan’s financial information as stated on Form 5500. This documentation must be provided to participants within the first nine months after the close of the plan year.
ERISA Audit
If your plan has 100 or more eligible participants, ERISA requires that the plan be audited annually and that an Accountant’s Statement be included in annual filings. Even if your plan does not require an audit, it is a good business practice to have the plan audited by an ERISA professional. The audit process will identify areas where your organization is falling short of ERISA compliance, as well as provide suggestions for curing that defect.
Professional ERISA Compliance Services
Most companies understand the importance of adhering to ERISA regulations. However, it can be complicated and difficult for an organization to fully understand the requirements, stay informed of changes to ERISA and provide required documentation on a timely basis.
Therefore, it is highly recommended that companies work with ERISA professionals that are fully versed in ERISA requirements and have the experience and knowledge to implement necessary changes. Qualified ERISA professionals can provide a number of services, including:
- Creation of plan documentation.
- Verification of plan documentation to ensure that plan documents are up to date.
- Publishing of required documentation.
- Compilation of required reporting.
- Filing of documentation in order to correct previous filings that were inaccurate or incomplete.
- Preparing of documentation to regain ERISA compliance.
