ERISA COMPLIANCE
BY: NICK PHILKO
STERLING INSURANCE
GROUP
The Importance Of ERISA Compliance To
Employee Benefit Plans
S
ince the Employee Retirement
Income Security Act (ERISA) was
enacted in 1974, it has set the
minimum standards for pension
and welfare plans provided by
employers in order to protect employees. It
may (or may not) be surprising that almost
all private sector employers are subject
to compliance with ERISA, and there
are some pretty hefty penalties for not
following through with that.
ERISA DOES A FEW THINGS THAT
EMPLOYERS SHOULD NOTE, AND IT
MAY CHANGE THE WAY THEY HANDLE
THEIR BENEFIT OFFERINGS:
•
ERISA almost always preempts state
laws that apply to ERISA plans.
• State insurance laws still apply to
insurers. Thus, state laws regarding
insurance policies are not going to be
preempted. Insured ERISA plans are
indirectly subject to those state laws.
• ERISA plans cannot be deemed to
be insurance companies. ERISA
plans that are self-funded cannot be
regulated by state insurance laws.
So who has to comply with ERISA? Nearly
all private sector employers. That includes
corporations, nonprofits, partnerships, and
sole proprietorships. Exempt entities would
be church and governmental plans.
THREE KEY PLAYERS IN THE
SYSTEM ARE THE PLAN ITSELF, THE
PLAN SPONSOR, AND THE PLAN
ADMINISTRATOR:
• The plan is a separate entity which is
subjected to ERISA requirements and
can sue and be sued.
• The plan sponsor creates and
maintains the plan. For single
employer plans, the employer is the
plan sponsor.
• The plan administrator is directly
responsible for ERISA compliance. For
single employer plans, this would be
the employer. Other entities can be
designated as administrator in the
documentation of the plan.
What happens if ERISA is not being
followed? The US Department of Labor
enforces compliance, with primary
enforcement responsibility being held
by the Employee Benefits Security
Administration (EBSA). Violations can
be met with investigations, enforcement
actions, and penalties from the
Department of Labor, and they also
open the door to private lawsuits from
employees. In 2017 alone, the EBSA
conducted 1,707 civil investigations, 65.3
percent of which resulted in corrective
action (monetary or otherwise). They also
closed 307 criminal investigations leading
to 113 individuals being indicted. Serious
business, and not something to leave
unattended.
How about your company? Do you offer
benefit plans to your employees? If so, are
you in compliance with ERISA? If not or if
you aren’t sure, it pays to do some looking
into. At Sterling, we can help. We have
professionals who have been working with
companies on ERISA compliance for years,
and we can help you as well. Give us a call
for more information.
Nick Philko is an Employee Benefits and Business Insurance Producer at Sterling Insurance Group.
Using his more than 20 years of experience, Nick specializes in crafting tailor-made, extensive
Employee Benefits packages for companies large and small across the country. As a Risk Manager,
organizations across all industries rely on Nick and the Sterling Employee Benefits team for benefits
administration, compliance, group health insurance plans and more.
Contact him at [email protected] or (586) 843-2768.
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