UGS ERISA Introduction

ERISA (Employee Retirement Income and Security Act) is the comprehensive federal law that regulates pensions, retirement plans and welfare employee benefits.  Title I of ERISA applies to and imposes requirements specifically on employee health and welfare plans.

Most employer and multiemployer sponsored health and welfare plans are covered under ERISA.  This is true whether the plans are small or large, fully insured or self-insured, although certain obligations may vary according to the size and type of plan.  Employers assume various roles under ERISA (whether named or by default) and should be aware of what plans ERISA covers and the associated compliance responsibilities and obligations.

Covered Plans

While most employers are aware that their health plan is covered under ERISA, they may be surprised to learn that many of their other welfare plans are also subject to this federal statute and its regulations.

ERISA Plan Criteria

To qualify as a health and welfare plan subject to ERISA, the plan must meet the following criteria:

• It must be a plan, fund or program
• It must be established or maintained by the employer
• Its purpose must be to provide the following benefits to participants or beneficiaries:
  • Medical, surgical or hospital benefits
  • Sickness, accident, disability, death or unemployment benefits
  • Vacation benefits
  • Apprenticeship or training benefits
  • Daycare centers
  • Scholarship funds
  • Prepaid legal services
  • Holiday and severance benefits
  • Housing assistance benefits

ERISA Welfare Plans

The plans and categories shown in this section are not all-inclusive, and whether a certain type of benefit falls into these categories is fact-sensitive.  Any doubts or questions concerning ERISA’s application should be resolved by legal counsel.

• Accidental Death and Dismemberment Insurance
• Business Travel Accident Policies
• Cancer Insurance
• Death Benefits (other than life insurance)
• Dental Benefits
• Disability Benefits (STD and LTD)
  • if insured and funded other than as payroll practice
• Employee Assistance Programs
  • if medical benefits provided
• Group Term Life Insurance
• Group Universal Life Insurance
• Health Insurance
• Health or Medical Benefit Plan (self-insured)
• Health Flexible Spending Account (under Cafeteria Plan)
• Health Maintenance Organizations (HMOs)
• Health Reimbursement Accounts (HRAs)
• Legal Plans (pre-paid group)
• Long-Term Care Plans
  • to the extent these provide nursing care
• Medicare Premium Subsidies
• Multiple Employer Welfare Arrangements (MEWAs)
• Prescription Drug Plans
• Severance Pay Plans
• Smoking Cessation Programs
  • if medical benefits provided
• Split-Dollar Life Insurance
• Vision Plans (whether insured or self-insured)
• Wellness Programs
  • if tied to health plan or offers medical care

Plan Exemptions

There are certain criteria that exempt plans from being subject to ERISA.

These exemptions include:

• Governmental and church plans.
• Plans maintained solely to comply with state-law requirements for workers compensation, unemployment compensation or disability insurance.
• Education assistance programs that are paid by the employer and not through insurance.
• Plans that are paid as a normal payroll practice to currently employed individuals, and are paid from an employer’s general assets.  These include: wages, overtime pay, shift premiums, holiday/weekend premiums, sick pay, vacation pay, holiday pay, jury duty pay, and certain short-term and long-term disability benefits.
• On-site facilities for treating minor illnesses/injuries or providing first aid.
• Remembrance or “get well” funds that provide gifts or flowers.
• Voluntary “Employee Pay All” Plans where the employer allows certain vendors to market products to their employees.  Although employers may payroll deduct the premiums for these products and forward them to the outside company, the ERISA exemption will be lost if these deductions are made pre-tax under a cafeteria plan.  This exemption will also be lost if the employer endorses the plan by paying any part of the premium, negotiating plan terms, assisting with claim forms, or performing recordkeeping.  In addition, the employer may not receive payment from the outside company for being allowed to market products to its employees.

Reporting & Disclosure

The following is a list of some of the general reporting and disclosure notice requirements of ERISA.  In addition, there may be other non-ERISA disclosures that are required.  Employers should consult legal counsel for a determination of all (ERISA and non-ERISA) reporting and disclosure requirements that apply to their plans.

All Plans
Summary Plan Description (SPD)
Plan Amendments
Written Request by Participants for Plan Documents
Claim Procedures Notice

Additional disclosures required for Group Health Plans
Form 5500¹
Summary Annual Report¹
Claims Procedure Notice
Qualified Medical Child Support Order (QMCSO) Receipt and Determination Letters
HIPAA Certificate of Creditable Coverage
HIPAA Special Enrollment Notice
HIPAA Pre-existing Condition Initial & Determination Notices
Women’s Health and Cancer Act Notice²
COBRA General Notice and COBRA Election Notice³
Conversion Notice*

¹Applies to employers with 100 or more plan participants at the beginning of the plan year, and all “funded” plans (i.e. benefits are paid from plan assets rather than from insurance or the employer’s general assets)
²Applies to plans with mastectomy benefits
³Generally applies to employers with 20 or more employees (full-time and part-time) on more than 50% of its typical business days in the previous calendar year
*Required for certain COBRA qualified beneficiaries where the plan provides a conversion option

Employer Roles

Employers may take on different roles under ERISA, each with its own set of obligations.  The sub-headings under “Employer Roles” describes a distinct role, how to determine if the employer has assumed that role, and the associated responsibilities.

Please note that this section deals only with single employers.  While most Multiemployer plans or Multiple Employer Welfare Arrangements (MEWAs) are covered by ERISA, the rules may apply differently.  Please see Multiemployer or MEWA specific compliance topics for more information about these types of plans.

Plan Sponsor

ERISA does not require employers to provide benefits, but once they do, they become the “Plan Sponsor.”

Among other things, the Plan Sponsor is responsible for establishing, maintaining, amending and terminating health and welfare plans.

They also typically provide a portion of the funding required to operate the plan and pay benefits.

Plan Administrator

The ERISA Plan Administrator assumes the primary role for administering the health and welfare plan, and assumes the liability for failing to properly perform these duties.

ERISA provides that if the plan does not specifically name a Plan Administrator, then the Plan Sponsor (employer) assumes this role by default.  Even though as a practical matter the plan’s insurer or Third Party Administrator (TPA) may be performing most of the plan administration duties, they are not legally considered to be the Plan Administrator unless specifically identified as such in the plan document.  Therefore, most employers who sponsor ERISA plan are Plan Administrators.

The employer may designate an individual, specific position (such as “HR Manager”), or a committee as the Plan Administrator.  They may also name a person or committee to act on behalf of the Plan Administrator.  However, due the associated liability of this designation, legal counsel should be sought when determining the designated Plan Administrator.

The Plan Administrator takes on numerous responsibilities in relation to:

• Form 5500 and Other Filings
• Plan Disclosure
• COBRA
• HIPAA
• Qualified Medical Child Support Orders
• Recordkeeping

ERISA Fiduciaries

Every ERISA plan must provide for one or more named fiduciaries that have authority to control and manage the operation and administration of the plan.  Typically, the employer will be the named fiduciary, since it has discretionary authority in the administration of the plan.

In addition, many times the Plan Administrator is also a named fiduciary.

Plans may also name fiduciaries for specific plan responsibilities.

As an ERISA Fiduciary, employers must be aware that:

• They must act solely in the best interests of plan participants and beneficiaries
• The expected standard of behavior is very high
• The defined fiduciary responsibilities apply to every act taken in a fiduciary capacity
• They must act strictly in accordance with the documents that govern the plan
• ERISA fiduciaries that breach their duties can be personally liable for damages and for DOL penalties imposed as a result of the breach.

Additional Resources

Department of Labor Web Site

Understanding Your Fiduciary Responsibilities Under A Group Health Plan