Wrap it up/Benefitspro

By Gentrie Pool, sales director for Sterling Health Services

Ever heard of an ERISA Wrap? Do you even know what ERISA stands for? Did you know groups down to two lives are subject to ERISA compliance?

Along with many other goodies (sarcasm implied), health care reform has brought ERISA compliance to the forefront of and if you are a broker or employer you better listen up. The Department of Labor has guaranteed to raise X amount of money to pay for X amount of health care reform. (If you want disclosure of said X, take it up with them. They haven’t released that figure.) That said, they’ve already hired more than 15,000 employees (sidebar: the IRS did the same thing, so that’s at least 30,000) to perform audits. Audit who? Audit what? I’m glad you asked. Here is a breakdown:

  • Who? Regardless of size or number of employees, nearly all private-sector corporations, partnerships, and proprietorships, including nonprofits, must comply with ERISA if they offer health or welfare benefits. This includes (list is not exhaustive): health, dental, vision, retirement accounts, vacation/PTO, employee assistance programs, scholarships, daycare, prepaid legal, death benefits, disability, wellness plans, HRAs, HSAs, FSAs, apprenticeships and training. Exceptions? Government entities and churches, of course.
  • What? ERISA was established to inform employees and plan participants of their rights, coverage and entitlements. You’ll see language such as: “Establish and maintain,” “uniform standards,” “fair and prudent,” “refrain from conflict of interest,” “ensure workers receive promised benefits,” “provide documents,” “report and disclose”…you get the idea.
  • Where? Human resource offices across America. There are certain time frames by which the employees must receive the ERISA Summary Plan Description: upon enrollment of any of the benefits above, first day of coverage, special enrollment, upon request.
  • Why? The feds established ERISA to protect employees and plan participants from the man.
  • How? The ERISA Wrap product is designed to capture all of a company’s benefits in one SPD for all company benefits. This means, that no one benefit carrier provides the language employers are required to have. And by the way, no carriers (except one health insurance carrier) includes ERISA required language anyway…because it is not a Department of Insurance requirement, rather, it is a Department of Labor requirement.

But what are the chances of receiving an ERISA documentation request, anyway?

  • One out of three employers is receiving them now (as of June 2012, the DOL intends to audit 75 percent of employers in states with enough manpower like California and Texas by October 2013. And the DOL has promised to audit all employers by 2018.) DOL first performed in-person requests, then via snail mail, and now by email.
  • Employers have seven days to respond with the 24 items requested (their request letter can be more than 40 pages long) or face a full-blown financial and benefit audit.
  • Roughly 75 percent to 90 percent are out of compliance right now, according to the DOL.
  • Penalties range from $100-$110/day per employee with a three-year “look back” provision for ERISA language, with up  to a $500,000 maximum.
  • For companies subject to Form 5500 filing, there is no statute of limitations and the government can look all the way back. Now is a good time to mention ERISA was enacted in 1974 (Sept. 2 by Gerald Ford, if you must know).
  • Though the DOL states they’re not targeting any particular region, industry, or group size it’s notable small employers are more likely to be out of compliance as a matter of practicality…unless they have ERISA or compliance attorneys on hand…or unless you’ve already shared this insight with them and they’ve purchased an ERISA Wrap.
  • Whoever processes the ERSIA filing is liable for it. Groups would be well-served to outsource this to an attorney or a compliance provider. If using a compliance provider, make sure they indemnify the client.
  • Though this is not a DOI requirement, agents might want to share this information with their groups and prospects before they come to you because they were audited and before another agent offers it to your client as a service.
  • ERISA stands for Employee Retirement Investment Security Act.

Please consult with an ERISA Wrap provider, ERISA attorney, or the Department of Labor for any changes or clarifications.