A look at how ERISA affects benefits today — and how a wrap product can help

by Tobias Kennedy

The Employee Retirement Income Security Act of 1974 (ERISA) was originally designed for the protection of individuals enrolled in pension plans.

In fact, ERISA actually has a pretty interesting history. Back in the ’60s pension reform gained some momentum after the Studebaker Corporation (the automotive manufacturer) closed its plant and due to a poorly funded program, thousands of people were left with no pensions at all. Thousands more received lump sum settlement payments valued at a fraction of the proper amount.

“The basics of the law require employers to meet certain standards for employee benefits programs, and the responsibility really does extend beyond just the retirement piece,” says Tobias Kennedy, executive vice president, Montage Insurance Solutions. “To comply with all of the regulations that ERISA levies, employers need to take action on their benefits products as well, such as the group medical, dental, life insurance, etc.”

Smart Business spoke with Kennedy about what you need to know about ERISA, including how ERISA wrap products can help you manage your obligations.

What’s surprising to many employers regarding ERISA?

While a lot employers know about ERISA broadly, many don’t realize that it is a federal law affecting all employers regardless of size. It also doesn’t matter whether the plans are fully insured or self-funded. And it impacts all employers including private sector, corporations and partnerships.

Why it even more important today to stay on top of your ERISA obligations?

Not only are there are a lot of employers out there who are a little under informed, but at the same time the Department of Labor (DOL) has been awarded funds to audit groups who may not be fully ERISA compliant by cross-referencing retirement with health and welfare.

So, it’s really a perfect storm where employers are being hit hard for thousands, sometime hundreds of thousands of dollars. The DOL has the authority to assess penalties up to $1,100 per day, per line of insurance with no maximum cap and no statute of limitations, so non-compliance can be expensive.

What can employers do about this?

Unfortunately, master contracts, certificates and benefit summaries do not qualify as a written plan document. A proper ERISA wrap product is really your best solution because it will include much of the required information all in one place.

A wrap document is where any required ERISA language — and any additional items that are needed — are added, or wrapped, to the insurance carrier’s certificate.

A good ERISA wrap will gather things like the plan administrator’s name, how the plan is funded, eligibility requirements for employees, rules about protected health information, required notifications such as WHCRA (Women’s Health and Cancer Rights Act) enrollment, Newborn’s Acts and Michelle’s Law, information regarding COBRA administration and more.

To make sure this is done properly, the easiest thing to do is simply call your broker. This isn’t just one document and then you’re good to go. It’s an annual upkeep, and you’ll want to be sure you’re working with a partner versed in the arena to ensure this gets properly completed after each renewal period. •

Tobias Kennedy is an executive vice president at Montage Insurance Solutions. Reach him at 1 (888) 839-2147 or [email protected].