ERISA Guidelines and Requirements
The Employee Retirement Income Security Act of 1974 (ERISA) is the federal law that governs employee benefit plans and serves to protect plan participants. As a general guiding principle, compliance under ERISA means treating all plan participants equally in terms of uniform eligibility requirements and not discriminating in favor of highly compensated employees (HCEs). Throughout the years, ERISA has been amended many times to increase the amount of protection offered to beneficiaries. As an amendment example, ERISA now requires health care plans sponsored by employers with 20 or more employees to offer continuation coverage (under the Consolidated Omnibus Budget Reconciliation Act (COBRA)), with tax penalties for noncompliance.
What Plans are Regulated by ERISA?
Some of the pension benefit and welfare benefit plans offered by employers that are subject to all, or some, parts of ERISA are as follows:
Specifically exempted from the reporting and disclosure rules of ERISA are:
- defined benefit and defined contribution pension plans
- deferred compensation plans
- health, accident, sickness, and disability plans
- apprenticeships and other training programs
- supplemental retirement income plans
- government plans
- church plans
- plans set up under separate laws covering workers compensation, disability insurance, or unemployment compensation
- unfunded excess benefit plans
ERISA requires that plan administrators provide clear information to plan participants about how benefits are funded, accrued, and vested. Fiduciary responsibilities of administrators include acting as a "prudent person"regarding all aspects of the plan. Finally, ERISA outlines specific reporting and disclosure guidelines, including the filing of annual reports with the Internal Revenue Service (IRS) and the distribution of summary plan descriptions to participants.
Federal vs. State Law
ERISA supersedes state laws relating to employee benefit plans unless a specific exception applies. The following state laws are not preempted by ERISA:
- state laws regulating banking, insurance, or securities
- applicable state criminal laws
- state laws covering qualified domestic relations orders (QDROs) and qualified medical child support orders (QMCSOs)
- state laws outlining any state cause of action for Medicaid recoupment Hawaii's Prepaid Health Care Act
While these distinctions may appear clear-cut, the following example in the area of insurance demonstrates how confusion over federal vs. state priority can arise: State laws can regulate insurance companies by stipulating what benefits should be included in policies; however, state laws do not dictate the benefits employers must offer since neither an ERISA-governed employee benefit plan nor a self-insured benefit plan is considered an insurer. Consequently, state insurance laws mandating that insurers offer certain benefits generally are preempted and do not apply to employee benefit plans.
ERISA is significant for employers and employees alike, as it strives to maintain equality and protection for all of its participants. However, compliance under ERISA requires adherence to complex administrative and reporting requirements, and employers should rely on professional legal counsel to help ensure proper planning.