ERISA and Employee Benefit Plans: FAQs
Employers who offer a group benefit plan subject to ERISA regulation face many administrative, compliance and operational challenges as well as fiduciary risks. Every employee benefits plan must have particular key elements, including:
1. A written plan describing the benefit structure, also known as a Summary Plan Description (SPD);
2. A guide for day-to-day operations of the plan;
3. A trust fund that holds the plan’s assets;
4. A recordkeeping system for tracking contribution and benefit payments and maintaining participant and beneficiary information; and
5. Documents detailing plan information that can be given to employees participating in the plan and to the government regulators.
Retirement Plan Sponsor Requirements
As retirement plan sponsors, employers are required to observe certain regulations set forth by the U.S. Department of Labor, the Internal Service and the Pension Benefit Guarantee Corporation.
Specifically, employers implementing a retirement benefit plan must adhere to the rules of the Employee Retirement Income Security Act (ERISA).
ERISA is a federal law that establishes minimum standards for employee benefit plans in private industry, including retirement, health and other welfare benefit plans.
Specifically, ERISA does the following:
• Requires benefit plan sponsors to regularly provide participants and beneficiaries with information regarding plan features and funding;
• Dictates the minimum requirements for participation, vesting, funding, and benefit accrual;
• Requires accountability of the plan’s fiduciaries; and
• Entitles participants to sue for benefits and violations of fiduciary responsibilities.
ERISA requires that employee benefit plans have at least one fiduciary, individual or entity, written into the plan. A fiduciary is an individual or entity that acts on behalf of a plan’s participants and is active in the administration and implementation of a benefits plan.
A plan’s fiduciary body will often include trustees, investment managers, plan administrators, and all individuals exercising discretion in the administration of the plan. Attorneys, accountants, and actuaries are usually not considered fiduciaries when acting solely in their professional capacities. Similarly, employers are not always considered fiduciaries, even though they initially decide to create a benefits plan.
Employer or Fiduciary?
Sometimes an employer will function as a fiduciary and act on behalf of participants and beneficiaries of their company’s group health plan. However, there are many administrative duties that ERISA classifies as “business decisions,” rather than “fiduciary actions.” The decisions to create a plan, to design the benefits package, to amend a plan, or to eliminate a plan are considered employer business decisions, not fiduciary actions, and therefore are not governed by ERISA.
Employers may be considered fiduciaries only when they are taking steps to implement decisions related to a benefits plan, and are therefore acting on behalf of the plan.
“Most importantly, employers should have a clear understanding of fiduciary responsibility, even if they aren’t the plan’s fiduciary, and in-depth knowledge of all benefit plan’s provisions.”
-- Mark Johnson, Ph.D., J.D., ERISA Group Health Plan Expert
Contact ERISA Expert Dr. Mark Johnson
You can reach Dr. Johnson via email or by phone at 817-909-0778. He is available to confidentially discuss a benefits matter.
Click on the link to read about his representative ERISA cases.