ERISA Compliance and Other Priorities for Doing Kentucky Small Business Health Insurance Correctly

Updated: Apr 12

ERISA (The Employee Retirement Income Security Act of 1974)(1) is a federal law that sets minimum standards for most voluntarily established pension and health plans in private industry to protect the enrolled individuals in these plans. ERISA requires plan administrators to maintain and distribute SPDs (Summary Plan Descriptions) to plan participants.


A Common Problem

Unfortunately, failure to maintain and dispense them in a timely fashion is a common oversight. In fact, when polled, 71% of brokers say many clients do not have an SPD.(2) Non-compliance can result in a range of unpleasant ramifications, ones the administrator would do well to avoid. For instance:

  • Failure to provide an SPD or ‘Plan Document’ within 30 days of receiving a request results in a penalty of $110 per day per participant. That might not seem like much, but if you were out of compliance with just fifteen employees for thirty days, that would total $49,500!

  • Compliance failure could result in audits by the Department of Labor. Of course, just the labor costs associated with an audit could exceed the penalty numbers as well.


In addition, the ERISA regulations require that plan administrators write the SPDs in a way that plan participants can understand. “Many do not meet this standard,” according to Jen Calhoun, a principal with Mercer Human Resource Consulting’s Health and Benefits Division in Philadelphia. There are other essential requirements since the U.S. Department of Labor provides guidelines on what employers must cover in their SPD. This information includes the plan name and IRS-assigned number, employer’s name and address, administrator’s name and contact information, grievance and appeals process, ERISA and Health Insurance Portability and Accountability Act (HIPAA) rights statements, and statement of collective bargaining agreements, if relevant.(3)


Many additional terms are required. Clients of Commonwealth Insurance Partners can rest assured that their ERISA-compliance paperwork (although primarily digital) is covered and filed as needed and organized for easy access. We even have SPD distribution guidelines that will generate when you create a set of documents to understand how to distribute the SPDs. To ensure that your company and plans comply, contact Commonwealth Insurance Partners for a complete evaluation – and the peace of mind that comes with it!


References

  1. https://www.dol.gov/general/topic/retirement/erisa

  2. https://www.cipky.com/erisa-compliance/

  3. https://www.shrm.org/hr-today/news/hr-magazine/pages/0807sosnin.aspx

Resources

  1. https://www.dol.gov/general/topic/health-plans/planinformation

  2. https://www.dol.gov/general/topic/health-plans/education

  3. https://www.cipky.com/erisa-compliance/

  4. https://www.law.cornell.edu/cfr/text/29/2520.102-3