The Employee Retirement Income Security Act of 1974 (ERISA)
1. What is ERISA?
ERISA stands for the Employee Retirement Income Security Act of 1974 (ERISA). It is a Federal Act which aims to provide protections for participants in employee welfare benefit plans as well as retirement plans. It imposes a number of reporting and disclosure requirements on the administrators of employee welfare plans as well as mandating codes of conduct, responsibilities and obligations for fiduciaries of employee benefit plans.
ERISA covers most employee welfare benefit programs provided by any employee or employee organisation involved in interstate commerce. It does not apply to groups such as government employee programs, some church plans and plans that only cover self-employed individuals.
2. Who regulates ERISA?
The Internal Revenue Service (IRS) and the Department of Labour (DOL) are the bodies responsible for ERISA compliance.
3. What is the relevance of ERISA to Self-Insured Plans?
ERISA pre-empts employers from state regulation of their employee benefits programmes and self-insure. By not being regulated by individual states, employers are free to design their own benefit plans to suit their workforce and avoid state mandated benefits that would be expensive to provide.
4. What parts of a Self-Insured Plan are governed by ERISA?
ERISA consists of four distinct sections or "Titles", as they are known. Title 1 of ERISA is concerned with the rights of participants and the duties of the sponsors and fiduciaries of pensions and welfare benefits plans. Under Title I there are five sections that apply to group health plans as follows:
(i) Reporting and Disclosure
ERISA mandates that certain information regarding employee benefit plans is communicated to participants of the plans, the Department of Labour (DOL), and the Inland Revenue Service (IRS).
(ii) Fiduciary Duty
Individuals and their responsibilities must be identified and designated. These include the Plan Sponsor, who is the entity who is presenting the plan (normally the employer or employee organization) and the Plan Administrator.
(iii) Administration and Enforcement
Under ERISA documents and records must be kept, checked and recorded.
(iv) Continuation Coverage
ERISA requires that the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985 is included in the plan. COBRA requires employers to make healthcare coverage available to employees that are retiring from the company or are leaving it and who would otherwise lose their group healthcare benefits.
Note: Although ERISA generally pre-empts any state laws there are some state laws that will apply to self-insured plans which are the result of state implementation of Federal Laws such as the Fitzgerald Act which encourages apprenticeship programs. Self-funded plans will always be subject to federal requirements in ERISA and other Federal Laws as well as the tax code, which address issues such as discrimination.
(v) Group Health Plan Requirements
Plans must be in writing and should show who are the designated fiduciaries with responsibility for administering the plan. They also need to show what the procedures are for funding, administering and amending the plan and what the covered benefits under the plan are by producing a Summary Plan Description (SPD).
