In any industry, acronyms are par for the course. That said, there are certain acronyms that bridge every industry, particularly when they relate to employment laws. Whether you’re a business owner or employee, ERISA is likely something that will come up in conversation.
Here are the basics of this fundamental set of letters:
What is ERISA?
ERISA stands for the Employee Retirement Income Security Act of 1974. In short, ERISA was created to establish minimum standards for retirement plans (pension plans) as well as health and other welfare benefit plans to protect employees and employers. ERISA does not require employers to offer these types of plans plans, but it sets the standards for the employers that do. Most — though not all — private employers are governed by this federal mandate. Most voluntarily established health plans, life insurance, disability insurance, and apprenticeship plans in private industries are also protected by ERISA.
In regards to pension plans, ERISA requires providers to give participants their retirement plan information. It’s responsible for the following:
- Disclosing specifics about the plan features and funding;
- Setting minimum standards for participation, vesting, benefit accrual, and funding;
- Appointing fiduciary responsibilities for those who manage and control plan assets;
- Requiring plans to establish a grievance and appeals process for participants to get benefits from their plans;
- Giving participants the right to sue for benefits and breaches of fiduciary duty;
- Guaranteeing payment of certain benefits through a federally chartered corporation, known as the Pension Benefit Guaranty Corporation (PBGC), if a defined benefit plan is terminated.
What Benefits Does ERISA Offer Employers & Employees?
Over the past forty years, several amendments have been made to ERISA to expand the benefits it offers to employees. COBRA, for example, is an amendment of ERISA that allows some workers and their families to continue their health coverage after certain events, such as losing their jobs.
HIPAA, or the Health Insurance Portability and Accountability Act, is also a product of ERISA, providing important protections for Americans with disabilities or pre-existing conditions who may otherwise be discriminated against when they apply for new healthcare coverage.
ERISA is also responsible for the following:
- Newborns’ and Mothers’ Health Protection Act
- The Mental Health Parity Act
- Women’s Health and Cancer Rights Act
Employers benefit from ERISA because it creates processes and standards by which every applicable employer is governed. This consistency provides employers who are compliant with the guidelines of ERISA to be protected from erroneous or outrageous claims by employees. Employers that offer qualified plans also enjoy tax benefits.
Are There Drawbacks to ERISA?
The main caveat of ERISA is often its complexity. It’s not an easy law to understand, and with ongoing amendments being made, it can be easy for small business owners to lose track of the current requirements.
How to Stay in Compliance with ERISA
The Department of Labor provides a number of compliance resources on the Employee Benefits Security Administration’s website. The “People are Asking…” section can be particularly helpful for employers who are trying to get their fingers on the pulse of the most recent changes and updates to ERISA.
Many employers find the requirements governed by ERISA too difficult to navigate on their own. Hefty fines and penalties can be associated with non-compliance of ERISA regulations. If you have questions about your benefit plans and the ERISA requirements associated with these plans, contact us at Insight Insurance by calling 781-326-2631 to learn how we can help you.