Legal Affairs
ERISA compliance
How to make sure your employee benefit plans are in compliance with federal law
By Jason Stahl
Smart Business Akron/Canton | February 2007
For many employers today, employee
benefits constitute a significant expenditure. With that increased spending comes increased scrutiny and employer
obligations to make sure that what’s being
promised is actually being provided.
Paul Jackson, a labor and employment
attorney with Roetzel & Andress, L.P.A., says
it’s important for business owners to make
sure benefit plans are in compliance with the
federal law known as the Employee
Retirement Income Security Act (ERISA).
Smart Business spoke with Jackson
about why business owners should be concerned about their company’s ERISA plans
and what they should know about ERISA
compliance review.
What is an ERISA plan?
An ERISA plan is an employee pension
benefit plan or employee welfare benefit
plan. An employee pension benefit plan, as
defined by ERISA, includes any plan, fund or
program established or maintained by an
employer, an employee organization or both,
that provides retirement income to employees or results in the deferral of income by
employees for periods extending beyond the
termination of their employment. Therefore,
if the employer has any arrangement
designed to make payments to an employee
after the termination of employment, that
arrangement is likely an employee pension
benefit plan under ERISA.
Employee welfare benefit plans can provide medical or hospitalization benefits;
benefits in the event of sickness, accident,
disability, death or unemployment; or benefits for training, day-care centers, scholarship funds or prepaid legal services.
Why should I be concerned with my company’s ERISA plan?
The persons involved in the operation of
the plan or benefit arrangement can be —
and often are — considered fiduciaries
under ERISA. Fiduciaries have greater
responsibilities and personal liability for
failing to comply with those duties.
Additionally, the Department of Labor’s
Pension and Welfare Benefit Administration has increased its enforcement activity.
Currently, the Department of Labor (DOL)
targets pension, health and welfare plans
due to the downturn in the economy and the
recent publicity regarding high-profile loss-of-benefits cases. There are potential civil
and criminal penalties for an employer that
doesn’t comply with ERISA. There also has
been an increase in cases of employees
claiming their employer failed to exercise
sufficient oversight because of the significance of the benefits involved.
What is involved in ERISA compliance
review?
An ERISA compliance review typically
involves an evaluation of a company’s
plans, summary plan descriptions and
annual filings. Additionally, questions are
asked regarding the compliance of fiduci-aries with their responsibilities, a review of
the persons who act as fiduciaries, and a
review of the insurability of the exposure
of the fiduciaries involved with the ERISA
retirement or welfare benefit plan. Finally,
a review is conducted to make sure the
plans are being operated properly.
What key points should be examined in a
compliance review?
Documentary compliance: The plan and
trust documents, summary plan descriptions, employee communication materials
(such as employee notices) and enrollment
forms are reviewed to ensure they’re consistent and in compliance. For example,
many plan sponsors don’t have actual
ERISA documents for their health plans,
instead using booklets supplied by their
insurance carriers. These booklets frequently don’t meet ERISA’s plan documentation
standards and often don’t conform with a
plan’s actual administrative practices.
ERISA requires a plan be operated in accordance with its written plan documents. In
addition, such documentation is frequently
not in compliance with the Health Insurance
Portability and Accountability Act (HIPAA).
All of these documents must be examined, as
they are an employer’s best line of defense in
a litigation or claim situation.
Operational compliance: The plan’s
annual Form 5500 filings and any other filings made by the plan are examined to make
sure those requirements are being met.
Verification must be made so the plans are
being operated according to their written
terms. Such a review may include looking at
definitions and eligibility requirements and
how the plan is actually being administered.
The DOL recently issued guidance as to
the requested claims procedure for welfare
benefit plans. The provisions in the employer’s plan must be consistent with the DOL’s
requirements, and the persons responsible
for those claims procedures must be aware
of and follow those requirements.
Fiduciary compliance: Fiduciaries, who
may be the business owner or a manager,
have a number of personal obligations to
all plan participants. In this part of the
review, an analysis is made to determine
who the fiduciaries are, what their obligations are and what each must do to comply
with those obligations. This is one area frequently overlooked until a claim in litigation is made.
PAUL L. JACKSON is a partner with the Labor and Employment
Group at Roetzel & Andress, L.P.A. His practice focuses on
employee benefits, regulatory compliance, union matters, and
labor and employment litigation. Reach him at (330) 849-6657 or
pjackson@ralaw.com.
