In the fiscal year 2020, the DOL’s Employee Benefits Security Administration recovered over $2.6 billion from ERISA enforcement actions. Since 67% of ERISA investigations end in employer fines and corrective actions, you may be wondering how to reduce your risk when offering a health or retirement plan to your workers.
At Complete Payroll Solutions, we have more than 30 years of experience helping our clients stay compliant with ERISA. We know that keeping up with required notices and disclosures can be confusing and time-consuming, so here we’ll break down the steps to take to avoid the top ERISA violations.
After reading this article, you’ll know what it takes to ensure your plan, participants, and company are protected from compliance missteps.
The Employee Retirement Income Security Act of 1974 (ERISA) was enacted to protect individuals in health and retirement plans. Generally speaking, ERISA requires plan administrators to provide participants information about plan features and funding, provides fiduciary responsibilities for those managing plan assets, requires a grievance and appeals process for participants, and gives participants the right to sue the plan administrator for benefits and breaches of fiduciary duty.
ERISA applies to employer-sponsored group benefits that you may offer. These can be health plans, like medical insurance and dental coverage, as well as voluntary programs like life insurance, disability plans, and commuter benefits. It also covers your 401(k) retirement plans.
ERISA applies to most employee benefit plans, so that means yours are likely covered. The only plans that aren’t covered are those established by governmental entities or churches, or plans maintained solely to comply with workers’ compensation, unemployment, or disability laws.
Since ERISA governs both health and retirement plans, we’ll break down the requirements separately for both types of plans.
The SPD needs to be provided to participants within 90 days of them getting coverage. You should also provide an updated copy if anything changes with your plan.
The SPD needs to be provided to participants within 90 days of them getting coverage. You should also provide an updated copy if anything changes with your plan. If not, you’ll need to provide a new one every 10 years.
As you can see, there’s a lot of documentation required under ERISA to ensure transparency. So it’s no surprise that no matter what type of plan you offer, the two most common ERISA violations among employers arise from:
In addition, not filing can put you at risk for an audit. For example, if you filed a Form 5500 every year and then don’t one year, it’s a red flag. You may also trigger an audit if you have inconsistencies between forms from one year to the next, like when the opening balance for the year doesn’t match the ending balance of the year prior.
Audits can also arise from employee complaints. For instance, an employee may claim that your retirement plan doesn’t give participants enough investment options or that the fees are too high.
Other times, you may be audited for one reason, which quickly extends into an audit for ERISA compliance as well. If you’re being audited for pre-tax health plan deductions, for example, through that process, the focus may shift to ERISA documentation for your plan.
Of all the employment laws and regulations, ERISA rules can be some of the most challenging to navigate. And even unintentional violations can be costly. The good news is that by developing the proper plan documents and providing them on time, you’ll minimize your compliance risks.
Our compliance team at Complete Payroll Solutions can help ensure you satisfy ERISA requirements and keep you penalty-free by:
Start reducing your ERISA risks by visiting our compliance page.