Are Your Benefits Plans Putting You at Risk?

If you’re an employer, just the word “ERISA” might give you chills.  While the Employee Retirement Income Security Act, or ERISA, serves an important function, for employers it can represent the worst of the federal government: a vast and complicated set of requirements that can come with civil or even criminal penalties for violations. Now is the time of year when it makes sense to have an employment law lawyer review your benefits packages to make sure you are in compliance. In the meantime review your benefits plans to ensure they comply with ERISA by looking at these four critical areas:

    1. Disclosures

ERISA’s first major requirement for benefits plans concerns making sure employees have access to complete, accurate information about the products that are being offered.  ERISA specifically requires employees to be given a “summary plan description” that contains the basic information about the plan and is explicitly required to be “written in a manner calculated to be understood by the average plan participant.”  The summary plan description must contain information such as the requirements for eligibility, circumstances that could lead to ineligibility or denial of benefits, procedures for filing claims or challenging denials, and other pertinent details.

    1. Reporting

ERISA also requires reports to be filed with the federal government providing information about the benefits plans being offered and provided.  Perhaps chief among them is “Form 5500,” which is an annual report filed primarily for tax purposes; however, plans with fewer than 100 participants are generally exempt from this requirement.  On the other hand, noncompliance with reporting requirements can come with steep penalties, in some cases as much as $1,100 per day.

    1. Conduct and Fiduciary Duties

Like all federal programs, ERISA prohibits discrimination on grounds such as race, sex, or nationality in the provision and administration of benefits plans.  ERISA also places fiduciary duties on plan administrators, obligating them to manage plan funds and generally administer the plan in the best interests of the participants.  In addition, ERISA goes beyond assigning administrators a general fiduciary duty to provide a list of prohibited transactions as well as other conduct requirements and establishes substantial penalties for violating these duties.

    1. Procedural Safeguards

As noted above, ERISA’s required disclosures include claims processes and processes for challenging denials of benefits.  These disclosures must be backed by a written policy that thoroughly details every aspect of how claims are treated.  In addition, ERISA requires that claims and appeals be conducted in a fair and timely manner.

If thinking about ERISA gives you anxiety, the solution lies in the old adage “Knowledge is power.”  The federal regulations it creates are undeniably complex, but taking the time to understand their requirements will reduce your business’ risk of liability and potentially improve your sleep.  Our firm has helped hundreds of businesses navigate the benefits plan maze, and our ERISA specialists are available to help you understand your obligations under the law.  If you have questions about ERISA and would like to speak with an attorney, contact Willcox, Buyck & Williams, P.A. today for a consultation.