The Employee Retirement Income Security Act (ERISA) is a more than 40-year-old labor law that governs most retirement, health and welfare benefit plans (e.g., life, disability, accidental death and dismemberment insurance). ERISA set rules on managing plans from a fiduciary standpoint to help ensure employees who qualify receive their benefits. It also established requirements for communicating plan information to employees.
Since its enactment, numerous other laws have amended ERISA, expanding protections and notification requirements for employers. One of the best known is the Consolidated Omnibus Budget Reconciliation Act (COBRA), which allows some workers and dependents to continue their health insurance coverage after leaving a job. The Health Insurance Portability and Accountability Act (HIPAA) added requirements to ERISA. There were changes from the Newborns' and Mothers' Health Protection Act, the Women's Health and Cancer Rights Act, and the Mental Health Parity Act. Even the Affordable Care Act contained ERISA changes. It is the last change that that is leading to Department of Labor audits to make sure employers are complying with ERISA requirements, particularly for communicating with employees.
Here are some of the communications and disclosure requirements that employers need to pay attention to:
- Summary Plan Descriptions (SPD): The SPD is probably the most important document required by ERISA and there is no small plan exception. An SPD is required whether the plan covers 12 employees or 2,000. The SPD is the main vehicle for communicating plan description of the coverage levels and claims procedures of your plan as well as rights and obligations to participants and beneficiaries. An SPD should usually be furnished within 90 days after an employee first becomes covered under the plan. It can be online but all employees must reasonably be able to access it. So, if some employees do not have computers, hard copies must be available.
- Summary of Material Modification (SMM): Any alteration in a plan that is "material" and any change in the information required to be in the SPD must be communicated to plan participants as a material modification. This could include alterations in benefit levels, such as increased copayments or coinsurance changes. It is not enough to provide annual enrollment materials describing medical plan options. The SMM should be separate (and clearly labeled as such), pointing out the benefits changed.
- COBRA Notices: Most employers know they need to send a COBRA notice when an employee leaves a company. But, many fail to provide a General Notice of COBRA Rights to staff while they are employed. Basically, when employees join the plan, they should get a COBRA notice explaining what happens if they leave the company. Additionally, COBRA notices need to be sent to people on leave who may no longer be eligible for the plan and adult children who age off a plan.
- Summary Annual Reports (SAR): A summary annual report (SAR) discloses key information from a plan's annual Form 5500 (required for most plans with more than 100 participants). The SAR generally must be furnished within nine months of the plan year's end. There are specific requirements for SARs in terms of content so they are pretty formulaic in nature.
- HIPAA Notifications: There are requirements for employers, doctors, hospitals and other entities to provide notices of health privacy rights. These state that information cannot be used or supplied to anyone without permission. In today's age of data security issues, there are also HIPAA notification requirements following a breach of unsecured protected health information.
- Other Required Notices: The list of acts that amended ERISA also added notification requirements. For example, there is the Women's Health and Cancer Rights Act, the Newborns Act, the Mental Health Parity (in California), and the Family Medical Leave Act. Each of these has reporting requirements. (Many employers lump them together as a page of annual notices provided at annual enrollment or the start of the year.)
Employers need to be aware that the Department of Labor (DOL) is now conducting ERISA audits to make sure employers are conveying the required information in the appropriate formats. They actually expect 95 percent of employers to have at least one violation in an audit and most have considerably more. It would behoove employers to work with a benefits professional and conduct their own review before the DOL comes knocking and fines are involved.