ERISA Essentials and What to Advise Clients to Avoid Audits and be

ERISA Essentials and What to Advise
Clients to Avoid Audits and be ACA
• Federal Law Enacted in 1974
• Applies to plans sponsored by all size
employers, but does not apply to church or
government plans
• DOL & IRS increased scrutiny after ACA
Plans Subject to ERISA
Employee Welfare Benefit Plan
• Plan, fund or program
• Established or maintained by an employer
• For the purpose of providing medical and/or
other specified benefits
Plans Subject to ERISA
ERISA generally applies to the following
benefit Plans and fringe benefits, whether
they are fully insured or self-insured:
• Medical, Surgical, Hospital, or HMO
Group Insurance Plans
• Health Reimbursement Accounts
• Health FSAs (Flexible Spending
• Group Dental Insurance Plans
• Group Vision Insurance Plans
• Prescription Drug Plans
• Group Sickness, Accident, and
Disability Insurance Plans
• Group Life and AD&D Insurance Plans
• Group Long Term Care Insurance Plans
• Group Employee Assistance Plans
(EAPs) (if providing counseling, not just
• Severance Pay Plans
Group Business Travel Accident
Insurance Plans
Prepaid Legal Services
Unemployment Benefit Plans
Vacation Plans
Apprenticeship or other Training Plans
Scholarship Plans
Holiday Plans
Housing Assistance Plans
Wellness plans that provide or
reimburse for health care
419A(f)(6) and 419(e) Welfare Benefit
Plans not Subject to ERISA
• HSAs
• Premium only plans
• Certain self-insured plans, such as sick pay, short
term disability, paid time off, overtime, jury duty,
and vacation pay, may be exempt if benefits are
– as a "normal payroll practice,"
– to currently employed individuals (i.e., not retirees,
COBRA Participants, or dependents),
– without prefunding or using insurance,
– entirely from the employer's general assets, AND
– without employee contributions.
Plans not Subject to ERISA
• Most voluntary plans (whether group or
individual), if:
–Employee pays the entire premium
–Employer has limited involvement – employer
cannot endorse the plan
–Can be exempt, even if premiums paid through
cafeteria plan
Plan Sponsored by An Employer
• Be careful that plan does not cover the
employees of more than one employer
• Certain related employers (under common
control) are considered a single employer
– Subsidiary
– Brother/sister
• But if not a single employer, plan is considered a
MEWA – multiple employer welfare arrangement
- and is subject to additional laws
Requirements for Welfare Plans
under ERISA
• Plan Document
– Must be written
– Describe benefits, funding and procedures for payment
• Summary Plan Descriptions
– Provided to employees within 90 days
– Updated every 5 years if changes and every 10 years if no
• Summary of Material Modifications
– Amendments
– Provided to participants within 60 days after a material
reduction in coverage
Requirements for Welfare Plans
under ERISA
• Notices – WHCRA, NMHPA
• 5500 filings
• Fiduciary obligations
– Includes duty to follow plan documents
• Prohibited transactions
• ACA Compliance
– SBC’s
– Benefits and coverage mandates
– Grandfathered plans
DOL Audits
• In 2013, EBSA received $1.69 billion from its
audit program
– Enforcement
– Voluntary fiduciary corrections
– Informal complaint resolutions
• This includes retirement plans
DOL Audits
• May be initiated by:
– Random
– Complaint
– Tips from other agencies (IRS, HHS)
– 5500 Information
DOL Audits
• Process –
– EBSA sends letter to plan sponsor
– Requests an entire list of documents that must be
sent to DOL (list is 13 pages) with two pages focused
on ACA
– Auditor/Investigator completes checklist
– May include onsite visit or subpoena
– EBSA issues voluntary compliance letter (often 9 -12
months later) – will seek voluntary resolution to issues
– If issues not correct, EBSA may seek to impose
– Closing letter sent if no violations found
List of Documents that May be
Plan Document(s)
Form 5500 filings (past 3 years)
SPD’s for all benefits offered
SAR for last year (if applicable)
Service Provider Contracts
Payroll/contribution records
ACA Notices
List of Documents that May be
• COBRA Notices
• HIPAA Documents
• All documents sent to plan participants
If plan is funded, also:
• Trust Agreement
• Fidelity Bond
• Fiduciary Insurance Policy
• Trustee (bank) statements
Potential Consequences for NonCompliance
• Voluntary correction – no penalties if action
that is needed is agreed upon
• Civil monetary penalties
• Re-adjudication of incorrectly paid claims
How to Make sure your Client is
• Look at client’s compliance before the audit
letter comes.
• Make sure documents that are needed are in
place and are updated
• Make clients aware that compliance
obligations are more important than they
used to be

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