The Employee Retirement Income Security Act (ERISA) was passed in 1974 and protects retirement assets and other employee benefit plans for all Americans. In addition to retirement plans, all employer-sponsored group insurance plans, such as medical insurance, also fall under ERISA’s protections.
From its’ inception, ERISA has required that certain documents and disclosures pertaining to all group insurance plans be created, maintained, and distributed to employees each year. This applies to all employer-sponsored group insurance plans, regardless of the employer’s employee count. However, these requirements were not actively enforced by EBSA (The Dept. of Labor) until the Affordable Care Act (ACA) was passed in 2010. EBSA revisited these ERISA requirements and began enforcement to generate fines and penalties to help pay for the ACA’s provisions. The EBSA has over 1,900 employees involved in compliance reviews, and fines were up 72% in 2017 to a total of $1.1 Billion.
A Summary Plan Description, with all attached notices including a copy of the carrier’s certificates of coverage, is the first thing they will ask for in an audit. In addition, here is a partial list of other documents that are required:
- Summary of Material Modification
- Notice of Model Exchange
- Newborn’s Act Description of Rights
- Women’s Health & Cancer Rights Act Notices
Have you ever heard of these? About 90% of the employers I speak with have no idea what these documents are and are unaware of their responsibility to maintain and distribute them annually. Yet, non-compliance penalties can be as high as $110 per day, per employee, for as long as the employer is deemed to be out of compliance. It is also important to note that the insurance carriers do not provide any of these ERISA documents for distribution. Employers need to be working with a knowledgeable broker or some type of ERISA service company that can provide these documents to them and advise them on distribution.
The NYS DOL has partnered with the EBSA to audit health plans in NY State for ERISA violations. This was proudly announced by then Attorney General Eric Schneiderman back in 2016. Since then, the Department has greatly increased their auditing personnel and even have quotas to fill, so they are very serious about enforcement.
There is also a tremendous amount of inter-agency cooperation happening at both the federal and state levels, thanks to technology. An employer might be audited for Workman’s Comp, sales tax, ACA compliance, unemployment insurance, etc. and that can trigger an ERISA audit as well, especially if there are any violations found. If the employer is not compliant in one area, the assumption is that the employer is likely deficient in other areas as well, so the case is easily referred to the other departments.
The current regulatory environment makes it more important than ever that employers working with competent professionals who specialize in employee benefit consulting to assure that they remain fully compliant under the law. The consequences of non-compliance are extremely costly.
Joseph R. Sellitto