‘Compliance’ is a term that is commonly heard in the business world. Having a business that is in compliance is often a goal for many small businesses. However, if you are wondering is your business ERISA compliant, it cannot simply be a goal. In fact, ERISA non-compliance is the law, and stiff penalties await any business that fails to follow the law.
The ERISA, or the Employee Retirement Income Security Act, is a Federal law that stipulates specific minimum standards for welfare plans, health plans and retirement plans that qualify. Although this sounds simple enough at first glance, right beneath the surface lies the confusion and complexity of the law that often stops small business owners in their tracks.
The complexity of the law is becoming even more evident, especially with the passing of certain legislation such as the PPACA, or Patient Protection And Affordable Care Act. This is also known as the Health Care Reform Act. The PPACA has a direct impact on health plans that are covered by ERISA.
The Department of Labor and the Internal Revenue Service are two Federal agencies that not only oversee these types of plans but also work to ensure the plans are enforced. These agencies are also paying very close attention to sponsors, those who are compliant and those who are not. Between 2008 and 2010, over 70 percent of these retirement plans were audited by the DoL (Department of Labor), and the penalties averaged over $400,000 per plan.
So, with all of this information, it can be nerve-wracking for business owners to know is your business ERISA compliant. Fortunately, there are several things that can be done to make sure businesses are indeed compliant.
All plan documents have to be compliant with the regulations and laws. Any amendments made to the documents have to be signed by the appropriate parties wherever applicable. All plan operations are also required to be in compliance.
Having A Summary Plan Description And Summary Of Benefits In Place
A summary plan description, or SPD, is information that informs participants about all of the terms and conditions of the plan. Some of the information included is:
These SPDs are typically given to participants, and ERISA compliance requires that these documents are automatically sent to participants within a certain time frame.
On the other hand, an SBC (summary of benefits and coverage) provides participants with general information and they also allow participants the opportunity to compare different health plans before choosing one.
Employers can choose to integrate these two documents, but failure to provide one or the other is an ERISA violation that can result in hefty fines.
Health Plans Compliant With ERISA
Almost all group health plans should have SPD. These types of plans include all key medical benefits, but also include plans for dental, wellness, and vision. It is important to remember that the rules for ERISA apply to more than just the main health benefits, so be sure you account for all of them.
Responsibility Of Plan Administrator
ERISA compliance is the job of the plan administrator. This can be a designated person within the organization, or it can be the employer (sponsor of the plan). The plan administrator must be named in the SPD (summary plan description), and this person is not able to avoid liability for any SPDs by delegating tasks to other people in the organization.
Also, keep in mind that most TPAs (third-party administrators) are not usually designated to be plan administrators of ERISAs. However, they may assist with the distribution and drafting of a summary plan description if they are under contract.
Insurers are not responsible for creating SPDs for ERISAs either. They may decide to assist with benefit descriptions or certificates of coverage, but these items are not considered SPDs.
So, is your business ERISA compliant? These regulations can be difficult to understand, but by working with compliance professionals and resources, you will avoid making costly mistakes.
Do not hesitate to contact us if you or a business is in need of ERISA compliance services. We will provide best service for best price. Form 5500 Champions!
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