Understanding ERISA: Why Compliance Matters for Employers Offering Employee Benefits
Chloe McClimon
Helping businesses make health insurance affordable by bringing business logic to benefits decisions.
If you're offering employee benefits like health insurance or retirement plans, there's one law you need to be well-acquainted with: ERISA (Employee Retirement Income Security Act of 1974). But what exactly is ERISA, and why is it crucial for your business?
?? What is ERISA?
ERISA is a federal law that sets the ground rules for most retirement and health plans in private industry, ensuring that employees get the benefits they're promised. It's all about protecting the rights of plan participants and maintaining transparency in plan management.
?? Why Do Employers Need to be Compliant?
Legal Obligation: ERISA compliance isn’t optional—it's the law. Non-compliance can lead to hefty fines, legal battles, and damaged reputations.
Fiduciary Responsibility: If you manage or control plan assets, ERISA considers you a fiduciary. This means you’re legally required to act in the best interest of your employees, making sound decisions about their benefits.
Employee Protection: ERISA ensures that your employees receive the benefits they’re promised, providing them with a safety net and a means to hold employers accountable.
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??? How to Achieve ERISA Compliance:
Plan Documentation: Make sure your benefit plans are properly documented, including a comprehensive Summary Plan Description (SPD). Regular updates are key!
Fiduciary Training: Educate your team on their fiduciary duties under ERISA. Training is essential to ensure they understand their responsibilities.
Annual Reporting: Don’t forget the paperwork! File annual reports (Form 5500) with the Department of Labor to keep your plans transparent.
Employee Disclosures: Keep your employees informed with up-to-date SPDs and notices of any changes to their benefits.
Regular Audits: Regularly audit your plans to ensure everything is running smoothly and in line with ERISA guidelines.
Seek Professional Guidance: Working with ERISA attorneys or third-party administrators (TPAs) can make navigating compliance much easier.
Staying ERISA compliant isn’t just about avoiding penalties—it’s about building trust with your employees by ensuring their benefits are secure and well-managed. Compliance is an ongoing process, but with the right tools and support, you can protect both your business and your employees.