ERISA Compliance

What is ERISA?

ERISA stands for the Employee Retirement Income Security Act of 1974. It is a federal law dealing with minimum standards for most voluntarily established pension and employee benefit plans.

Why Does ERISA Matter?

It’s the law. Most private-sector corporations, partnerships, and proprietorships, including non-profit corporations, must comply with ERISA regardless of size or the number of employees. While ERISA does not require an employer to establish a retirement or health benefit plan, it does require those who meet certain minimum standards.

Which Benefit Plans are ERISA Plans?

Employee benefit plans under ERISA include plans providing medical, surgical, hospital care, or any benefits provided in the event of an accident, sickness, disability, death. Also included are vacation benefits, training programs, scholarship funds, prepaid legal, or any benefit described in the Labor Relations Act of 1947.

In general, ERISA applies to the following:

• Medical, Surgical, or Hospital Benefit Plans

• HMO’s, PPO’s, Group Insurance

• Health Reimbursement Arrangements (HRAs)

• Flexible Spending Accounts (FSAs)

• Dental Plans

• Vision Plans

• Prescription Drug Plans

• Sickness, Accident, and Disability Insurance Plans

• Group Life and AD&D Insurance

• Long Term Care Insurance Plans

• Unemployment Benefit Plans

• Holiday Plans

• Funded Vacation Benefits

• Scholarship Plans

• Business Travel Accident Plans

• Day Care Centers

• Severance Plans

What is a Plan Document & Why Does it Matter?

Plan Documents are required by ERISA to describe a plan’s terms and conditions related to its operation and administration. Each benefit plan that is subject to ERISA must have a written Plan Document. If an ERISA plan exists without the written document, it will be deemed out of compliance.

Plan documents are comprehensive and require tedious work. Don’t worry, you’re not alone. We’re here to help. Reach out to a compliance specialist today.

Affordable Care Act (Obamacare) Compliance

As a disclaimer, not all items will apply to your business. The best way to be sure is to contact our brokers for compliance requirements specific to your business.

These figures are updated year-to-year, so call us for the current compliance regulations and figures for 2024.

General Compliance

Employers cannot offer discriminatory coverage options.

Health Plan Administration

• Waiting Periods cannot exceed the 90 day limitation

• Orientation period prior to waiting period cannot exceed 30 days

• Health FSA documents must not exceed the $2,600 limit

• FSA Grace period vs $500 carryover provision must be specified

• Participation requirements must be met according to each carrier

• Full time definition must be 30 hours per week at most

• Group Size is dependent on the average number of full-time employees plus full-time employees for the previous year

• Commonly-owned companies are part of the calculation for accurate employer size determination

• Converting employees to 1099 to avoid the mandate is not allowed

• Review IRS Common Law employee rules to determine if staffing agency personnel would contribute to the overall employer size

• Look-back measurement periods to employees hired as full time are not advised

Documents for Employees

• Give employees DOL-mandated exchange notice to new employees within 14 days of hire

• Deliver Summary of Benefits and Coverage (SBC) documents

• Deliver 60-day notices of modification, if applicable

• For employers with 50+ full time employees in 2016, prepare IRS form 1095-C (2017) for full time employees by 1/31/2018

Plan Design Changes

• Explain metal tier coverage (Bronze, Silver, Gold, Platinum) to employees

• Explain ACA-mandated essential health benefits to employees

• Explain deductible and out of pocket maximums to employees

• Ensure policies cover all essential health benefits

• Ensure policies meet deductible and out-of-pocket maximums required to be ACA compliant

ACA Penalties

Applicable Large Employers may be subject to the Employer Shared Responsibility Provision. The following are penalties for not complying with it.

Penalty “A” 4980H (a)

1.   No offer of minimum essential coverage (MEC)

2.  Trigger: FT employee gets Premium Tax Credit (PTC) from Exchange

3.  $2,260* x all FT employees minus first 30 FT employees

4.  Calculated on a monthly basis at 1/12 of $2,260 or $188.33 per month

Penalty “B” 4980H (b)

1.  Coverage is not affordable or does not provide minimum value

2.  Trigger: FT employee gets Premium Tax Credit (PTC) from Exchange

3.  $3,390* per FT employee receiving a Premium Tax Credit from the exchange

4.  Calculated on a monthly basis at 1/12 of $3,390 or $282.50 per month

IRS Common Law Employee Rule

Since the ACA requires companies with 50 or more employees to provide affordable healthcare for their employees, employers are converting W2 employees to 1099 contractors. As a result, the Common Law Employee Rule was created.

The IRS follows three categories when determining whether an employee should be a W2 or 1099. Although there is a lot of room for interpretation, the following criteria is from the IRS website:

1.  Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?

2.  Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)

3.  Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?

Speak to a Health Insurance Broker in San Diego Today!