ERISA Compliance FAQs: Reporting and Disclosure Rules

ERISA Compliance FAQs: Reporting and Disclosure Rules

The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for employee benefit plans maintained by private-sector employers. ERISA includes requirements for both retirement plans (for example, 401(k) plans) and welfare benefit plans (for example, group health plans). ERISA has been amended many times over the years, expanding the protections available to welfare benefit plan participants and beneficiaries.

The Department of Labor (DOL), through its Employee Benefits Security Administration (EBSA), enforces most of ERISA’s provisions. Violating ERISA can have serious and costly consequences for employers that sponsor welfare benefit plans, either through DOL enforcement actions and penalty assessments or through participant lawsuits.

This Compliance Overview includes a set of frequently asked questions (FAQs) to help employers understand ERISA’s requirements for reporting and disclosure.

Links and Resources

• The DOL’s Reporting and Disclosure Guide for Employee Benefit Plans.

• Form 5500 Series website, which includes links to the Form 5500 and instructions.

• Fact sheet on the Delinquent Filer Voluntary Correction Program

PLAN DOCUMENT

Does Every ERISA Plan Need a Written Plan Document?

Yes. If an employer decides to provide benefits that are subject to ERISA, those benefits must be described in a written plan document. The plan document describes the terms of the plan and the plan’s operation and administration. An ERISA plan may exist without a plan document—not having a plan document just means that the plan is out of compliance with ERISA.

Which Topics Must the Plan Document Address?

There are several topics that must be addressed in the written plan document for a welfare benefit plan.

For example, the plan document should address:

• Benefits and eligibility;
• Funding of benefits;
• Treatment of insurance refunds and rebates;
• Procedures for claims and appeals;
• Designation of named fiduciary;
• Plan amendment and termination procedures;
• Required provisions for group health plans, such as COBRA rights and HIPAA special enrollment;
• Other legal provisions applicable to certain plans (such as subrogation and reimbursement and coordination of benefits); and
• Procedures for allocating and delegating plan responsibilities (for example, where certain administrative tasks will be performed by a third party administrator, or TPA).

What Should the Plan Document Look Like?

ERISA does not require that a plan document be in any particular format. The type of plan document depends mainly on the type of plan and the complexity of its benefits. When an ERISA plan is insured, the insurance company’s insurance certificate will often contain detailed benefit information. However, in most cases, the insurance certificate will not contain all of the provisions required for an ERISA plan document. For example, while the certificate may contain a detailed schedule of benefits, it may not address plan amendment and termination procedures.

The standard way of supplementing the certificate is to use a “wrap document” that contains the missing ERISA provisions. This document is called a “wrap document” because it essentially wraps around the certificate to fill in the missing provisions and becomes a single ERISA plan document.

Can Multiple Welfare Benefits Be Combined Into a Single Plan?

Yes. An employer may choose to combine its welfare benefits under a single plan document, creating one large “bundled” plan. An employer may also choose to include certain non-ERISA benefits, such as the Section 125 plan and dependent care FSA, in a bundled plan. Alternatively, an employer may choose to group its benefits into more than one ERISA plan.

The decision of whether to combine (or bundle) welfare benefits often depends on how it will affect the Form 5500 filing obligation.

• For larger employers, combining different benefits together may simplify the annual reporting requirement because only one Form 5500 will be required for the bundled plan.
• For smaller employers, however, each benefit offered as a separate plan may qualify for the Form 5500 exemption for small plans. Combining the benefits together under a bundled plan might cause the plan to exceed the threshold for small plans, which would trigger the Form 5500 filing requirement.