ERISA compliance protects the assets of millions of Americans so funds placed in retirement plans during their working lives will be there when they retire. In the world of HR compliance, many employers face stiff penalties for failure to report. The fact is, many employers don’t know what they don’t know, and that leads to missed deadlines and improper filings. Learn what you need to know about ERISA requirements, what it means for business owners and why ERISA compliance is so important.
What Are ERISA Guidelines?
The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for pension plans in private industry and provides for extensive rules on the federal income tax effects of transactions associated with employee benefit plans. ERISA requirements do not make it mandatory for employers to offer plans, but sets standards for those who do.
An example of ERISA compliance would be if you, as an employer, maintain a retirement plan, ERISA requirements specify when your employees can become a participant, how long they have to work before they have a non-forfeitable interest in their benefit, and how long they can be away from their job before it could affect their benefit. ERISA also stipulates whether your employee’s spouse has a right to part of their benefit in the event of their death. ERISA protects the interests of benefit plan participants (employees) and their beneficiaries by:
- Requiring the disclosure of financial and other information concerning the plan to beneficiaries;
- Establishing standards of conduct for plan fiduciaries;
- Providing for appropriate remedies and access to the federal courts.
Maintaining ERISA Compliance
Employers must provide reports to the government to prove they maintain ERISA compliance, but many fail to do so because they aren’t aware that the reporting process is their responsibility. Here’s a checklist to make sure your company stays ERISA compliant:
The ERISA Compliance Checklist
- Summary of Plan Description (SPD) – The SPD is the primary vehicle for informing employees and beneficiaries about their rights and benefits under their employee benefit plans. Because it’s clearly written, it should be easy for the average person to understand this document.
- Plan document - This is a legal document that tells plan participants about the benefits they are entitled to under the plan and provides guidelines to be used by the plan administrator in decision-making when it comes to plan operations.
- Insurance contract and certificate of coverage (provided by the insurance carrier)
Because the insurance carrier typically provides employers with a master contract and certificate of coverage or summary of benefits, some employers mistakenly assume this meets ERISA requirements. These carrier-provided documents contain some but not all of the content required under ERISA. Therefore, in practice, the combination of the "wrap" documents with the carrier-provided documents support the ERISA requirements.
ERISA compliance applies to many private employers, but not to all. It doesn’t cover group health plans established or maintained by governmental entities, churches for their employees, or plans which are maintained solely to comply with applicable workers’ compensation, unemployment, or disability laws.
If you’re a FrankCrum client, you don’t have to worry about ERISA compliance reporting. That’s just one of the many things we take care of when you choose to partner with us. Keeping you in compliance with HR regulations is what we do best!