The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that establishes minimum standards intended to protect private sector employees who work for companies that provide retirement plans and other benefits (unemployment, scholarship funds, prepaid legal services, etc.).
This law generally does not cover plans offered or maintained by governmental entities or religious organizations, or plans maintained outside of the United States for the primary benefit of nonresident aliens. ERISA requires plans to set up a grievance and appeals process for participants; it also grants participants the right to sue for breaches of fiduciary duty.
Staying Compliant With ERISA
Although the process of adhering to ERISA compliance requirements may seem overwhelming, there are resources you can utilize. One such example is a third-party administrator, (TPA) which, as its name suggests, is an organization that provides services such as employee benefits management and claims processing as part of a contract with another company. A TPA can help your business meet deadlines and fill out all required forms. Be sure to maintain regular and effective communication with your TPA.
The 2021 ERISA Compliance Requirement Checklist
As with any other federal law, it’s important to create a checklist of all compliance requirements to help you remain organized. Here is a close look at the three primary ERISA requirements for 2021: sending out quarterly statements, disclosing any plan changes and processing claims.
Send Out Quarterly Statements
The first key ERISA compliance requirement involves sending out quarterly benefit statements to plan participants as soon as possible, ideally, within 45 days of the end of the quarter, similarly to how many companies release quarterly earnings reports. If any plan participants turned age 72 in the previous year, be sure to distribute required minimum distributions (RMDs) for the first year. You should also submit summary plan descriptions that outline the coverage levels and claims procedures for all benefit plans.
Disclose Any Plan Changes
Participants should be notified of any plan changes (e.g. increased or decreased coverage) between 30 and 90 days before the effective date of the change. This should give your employees ample time to decide whether they wish to keep their current plan or switch to a new one. Private retirement plans can change for several different reasons, including company mergers and efforts to reduce costs or streamline plan administration. Consult the IRS’s Retirement Plan Reporting and Disclosure Requirements for more information on this subject.
Pay & Process Any Claims
The final ERISA compliance requirement concerns establishing a claims procedure to process claims for benefits. All plans should also provide participants with information whenever a claim is rejected. If your company provides welfare plans that are subject to ERISA, you will need to give all employees information about these plans, if you have an insurance contract. Meanwhile, retirement plans subject to ERISA must meet other complex requirements that may affect certain plan features such as fiduciary responsibility and reporting and disclosure requirements.
It’s also important to know about all of the forms required by ERISA. These include Form 5500 and Form 5500-SF, for welfare plans, which must be filed with the IRS. There are also forms that need to be submitted to the Department of Labor. However, small welfare plans (those with fewer than 100 participants whose benefits are fully insured) are exempt from ERISA’s requirements for reporting and disclosure. According to a recent report on Form 5500 filings by the DOL, the total number of pension plans grew to approximately 710,000 in 2017, a 1% increase from 2016.
Remain Compliant With Help From Our Business Insurance Agents
Reach out to the professionals at Pro Insurance Group in Elgin, Illinois for more information on how your business can stay ERISA-compliant. We are dedicated to serving as one-on-one advocates for all of our clients, regardless of their insurance needs and budget. One of our many objectives is to form deep, long-lasting relationships with our clients.
If your company provides employee benefit plans, including health, dental and vision insurance, you may be held responsible for plan mismanagement under ERISA. Mismanagement includes claims of negligence and actions that reveal you are not behaving in the best interest of your employees. A fiduciary liability insurance policy can protect your business from these types of claims. Aside from plan management failure, common claims include lack of investment diversity, wrongful denial or changes in benefits, conflicts of interest, improper counsel and failure to monitor third-party administrators.