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Employment Law Guide

Health Benefits, Retirement Standards, and Workers' Compensation: Employee Benefit Plans

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Updated: December 2016

Employee Retirement Income Security Act (ERISA),
(29 USC §1001 et seq.,(http://www.law.cornell.edu/uscode/29/1001.html) 29 CFR Part 2509 et seq.(https://www.dol.gov/dol/cfr/Title_29/Chapter_XXV.htm))

Who is Covered

Title I of the Employee Retirement Income Security Act (ERISA) is administered by the Employee Benefits Security Administration (EBSA). The provisions of Title I of ERISA cover most private sector employee benefit plans. Such plans are voluntarily established or maintained by an employer, an employee organization, or jointly by one or more such employers and an employee organization.

Retirement plans, a type of employee benefit plan, are established or maintained to provide retirement income or to defer income until termination of covered employment or beyond. Other employee benefit plans, called welfare plans, are established or maintained to provide health benefits, disability benefits, death benefits, prepaid legal services, vacation benefits, day care centers, scholarship funds, apprenticeship and training benefits, or other similar benefits.

In general, ERISA does not cover plans established or maintained by government entities or churches for their employees, or plans which are maintained solely to comply with workers' compensation, unemployment, or disability laws. ERISA also does not cover plans maintained outside the United States primarily for the benefit of nonresident aliens or unfunded excess benefit plans.


Basic Provisions/Requirements

ERISA sets uniform minimum standards to ensure that employee benefit plans are established or maintained in a fair and financially sound manner. In addition, employers have an obligation to provide promised benefits and satisfy ERISA's requirements for managing and administering private retirement and welfare plans.

EBSA, together with the Department of the Treasury's Internal Revenue Service (IRS), has the statutory and regulatory authority to ensure that workers receive the promised benefits. EBSA has principal jurisdiction over Title I of ERISA, which requires persons and entities that manage and control plan funds to:

  • Manage plans for the exclusive benefit of participants and beneficiaries;
  • Carry out their duties in a prudent manner and refrain from conflict of interest transactions expressly prohibited by law;
  • Comply with limitations on certain plans' investments in employer securities and properties;
  • Fund benefits in accordance with the law and plan rules;
  • Report and disclose information on the operations and financial condition of plans to the government and participants; and
  • Provide documents required in the conduct of investigations to ensure compliance with the law.

The Department of Labor also has jurisdiction over the prohibited transaction provisions of Title II of ERISA. However, the IRS generally administers the rest of Title II of ERISA, as well as the standards of Title I of ERISA that address vesting, participation, nondiscrimination, and funding.

Fiduciary Standards. Part 4 of Title I sets forth standards and rules for the conduct of plan fiduciaries. In general, persons who render investment advice or exercise discretionary authority or control over management of a plan or disposition of its assets are "fiduciaries" for purposes of Title I of ERISA. Fiduciaries are required, among other things, to discharge their duties solely in the interest of plan participants and beneficiaries and for the exclusive purpose of providing benefits and defraying reasonable expenses of administering the plan. In discharging their duties, fiduciaries must act prudently and in accordance with documents governing the plan, to the extent such documents are consistent with ERISA.

ERISA prohibits certain transactions between an employee benefit plan and "parties in interest," which include the employer and others who may be in a position to exercise improper influence over the plan, and such transactions may trigger civil monetary penalties under Title I of ERISA. The Internal Revenue Code ("Code") also prohibits most of these transactions, and it imposes an excise tax on "disqualified persons" (whose definition generally parallels that of parties in interest) who participate in such transactions.

Exemptions. Both ERISA and the Code contain various statutory exemptions from the prohibited transaction rules and give the Departments of Labor and Treasury, respectively, authority to grant administrative exemptions and establish exemption procedures. Reorganization Plan No. 4 of 1978 transferred the Department of Treasury's authority over prohibited transaction exemptions to the Department of Labor, with certain exceptions.

The statutory exemptions generally include loans to participants, the provision of services needed to operate a plan for reasonable compensation, loans to employee stock ownership plans, and investment with certain financial institutions regulated by other state or Federal agencies. (See ERISA Section 408 for the conditions of the exemptions.) The Department of Labor may grant administrative exemptions on a class or individual basis for a wide variety of proposed transactions with a plan. Applications for individual exemptions must include, among other information the following:

  • A detailed description of the exemption transaction and the parties for whom an exemption is requested
  • The reasons a plan would have for entering into the transaction
  • The percentage of assets involved in the exemption transaction
  • The names of persons with investment discretion
  • The extent of plan assets already invested in loans to, property leased by, and securities issued by parties in interest involved in the transaction
  • Copies of all contracts, agreements, instruments, and relevant portions of plan documents and trust agreements bearing on the exemption transaction
  • Information about plan participation in pooled funds when the exemption transaction involves such funds
  • A declaration by the applicant, under penalty of perjury, attesting to the truth of representations made in such exemption submissions
  • Statement of consent by third‑party experts acknowledging that their statement is being submitted to the Department as part of an exemption application

The Department's exemption procedures are set forth at 29 CFR 2570.30 through 2570.51 (/elaws/leave-dol.asp?exiturl=http://www.ecfr.gov/cgi-bin/text-idx^Q^node=sp29.9.2570.b|rgn=div6&exitTitle=29%20CFR%202570.30%20through%202570.51&fedpage=yes).

Continuation of Health Coverage. The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) included provisions for continuing health care coverage. These provisions, which are codified in Part 6 of Title I of ERISA, apply to group health plans of employers with 20 or more employees on a typical working day in the previous calendar year.

COBRA contains provisions giving certain former employees, retirees, spouses, former spouses, and dependent children ("qualified beneficiaries") the right to temporary continuation of health coverage at group rates.  This coverage, however, is only available when coverage is lost due to certain specific events ("qualifying events") such as termination of employment.  Group health coverage for COBRA participants is usually more expensive than health coverage for active employees, since usually the employer pays a part of the premium for active employees while COBRA participants generally pay the entire premium themselves. 

Plans must give covered individuals an initial general notice informing them of their rights under COBRA and describing the law. The law also obliges plan administrators, employers, and qualified beneficiaries to provide notice of certain "qualifying events." In most instances of employee death, termination, reduced hours of employment, entitlement to Medicare, or bankruptcy, the employer must provide a specific notice to the plan administrator. The plan administrator must then advise the qualified beneficiaries of the opportunity to elect continuation coverage.

The Department of Labor's regulatory and interpretive jurisdiction over the COBRA provisions is limited to the COBRA notification and disclosure provisions.

Jurisdiction of the Internal Revenue Service. The IRS has regulatory and interpretive responsibility for all provisions of COBRA not under the Department of Labor's jurisdiction. In addition, the IRS generally administers and interprets the ERISA provisions relating to participation, vesting, funding, and benefit accrual, contained in parts 2 and 3 of Title I.

Health Laws Under Part 7 of ERISA

Many Federal laws have been enacted to amend ERISA to provide important protections for participants and beneficiaries of group health plans and health insurance coverage offered in connection with group health plans. These protections are generally found under Part 7 of Subtitle B of title I of ERISA.

The Patient Protection and Affordable Care Act (the Affordable Care Act or ACA). The Affordable Care Act amended ERISA to incorporate several health coverage market reforms. These provisions are set forth in Public Health Service Act sections 2701 through 2728, which are incorporated by reference in ERISA section 715. These provisions include rules relating to the prohibition of preexisting condition exclusions, the prohibition of lifetime and annual dollar limits for essential health benefits, the prohibition of rescissions, and required coverage of certain preventive services without cost sharing.

Health Insurance Portability and Accountability Act of 1996. The Health Insurance Portability and Accountability Act of 1996 (HIPAA) amended ERISA to provide for improved portability and continuity of health coverage connected with employment, among other things. These provisions include rules relating to special enrollment rights, and prohibition of discrimination against individuals based on health status.

The Newborns' and Mothers' Health Protection Act of 1996 (Newborns' Act) requires plans that offer maternity coverage to pay for at least a 48 hour hospital stay in connection with childbirth (a 96 hour stay in connection with a cesarean section).

The Women's Health and Cancer Rights Act (WHCRA) contains protection for patients who elect breast reconstruction in connection with a mastectomy. For plan participants and beneficiaries receiving benefits in connection with a mastectomy, plans offering coverage for a mastectomy must also cover reconstructive surgery and other benefits related to a mastectomy.

The Mental Health Parity Act of 1996 (MHPA) provides for parity in the application of aggregate lifetime and annual dollar limits on mental health benefits with dollar limits on medical/surgical benefits. Generally, group health plans offering mental health benefits cannot set annual or lifetime dollar limits on mental health benefits that are lower than any such dollar limits for medical and surgical benefits.

The Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) expanded the protections of MHPA to financial requirements (e.g., copayments or deductibles)and treatment limitations (e.g., visit limits). Any type of financial requirements or treatment limitations imposed on mental health or substance use disorder benefits in a classification can be no more restrictive than the predominant requirements or limitations applied to substantially all medical and surgical benefits covered by a plan in the classification. In addition, there are rules regarding nonquantitative treatment limitations (such as prior authorization requirements).

The Genetic Information Nondiscrimination Act of 2008 (GINA) prohibits group health plans and group health insurance issuers from discriminating in health coverage based on genetic information. Plans and issuers may not use genetic information to adjust premium or contribution amounts for the group covered under the plan, request or require an individual or their family members to undergo a genetic test, or request, require, or purchase genetic information for underwriting purposes or prior to or in connection with an individual's enrollment in the plan.

Michelle's Law, passed in 2008, prohibits group health plans from terminating coverage for a dependent child who has lost student status as a result of a medically necessary leave of absence. Plans must continue to provide coverage for up to one year, or until coverage would otherwise terminate under the plan. Plans are allowed to require physician certification of the medical necessity for the leave of absence.

The Children's Health Insurance Program Reauthorization Act of 2009 (CHIPRA) requires group health plans and group health insurance issuers to permit an employee or dependent that is eligible for but not enrolled in the plan to enroll when the employee or dependent is covered under Medicaid or CHIP and loses that coverage as a result of loss of eligibility or when the employee or dependent becomes eligible for Medicaid or CHIP assistance with respect to coverage under the group health plan. CHIPRA also created new notice requirements related to these special enrollment rights.


Employee Rights

The Act grants employees several important rights. Among them are the right to receive information about their pension or health benefit plans, to participate in timely and fair processes for benefit claims, to elect to temporarily continue group health coverage after losing coverage, to receive certificates verifying health coverage under a plan, and to recover benefits due under the plan.


Recordkeeping, Reporting, Notices and Posters (Health Plans)


Notices and Posters

Posters.  There are no Federal poster requirements.

Notices.  ERISA contains several notice requirements for health plans including, but not limited to, a Summary Plan Description (SPD), special enrollment notice, and certificates of creditable coverage.  Other notices required by COBRA, HIPAA, WHCRA, the Newborns' Act, and Michelle's Law may be required depending on the number of employees and the benefits offered by the plan. The Reporting and Disclosure Guide for Employee Benefit Plans(https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/our-activities/resource-center/publications/reporting-and-disclosure-guide-for-employee-benefit-plans.pdf) can be used as a quick reference tool for certain basic disclosure requirements under ERISA. 

EBSA has also created several sample and model notices: 


Recordkeeping

ERISA contains recordkeeping requirements. An accurate recordkeeping system will track and properly attribute contributions, expenses, and benefit distributions. If a contract administrator or other entity assists in managing the plan, that entity may help keep the required records. In addition, a recordkeeping system will help the plan administrator, or provider prepare the plan's annual return/report that must be filed with the Federal Government. For more information visit the EBSA Compliance Assistance page(https://www.dol.gov/agencies/ebsa/employers-and-advisers/small-business/compliance-assistance).


Reporting

EBSA, in conjunction with the IRS and the Pension Benefit Guaranty Corporation (PBGC), publishes the Form 5500 Annual Return/Report(https://www.dol.gov/agencies/ebsa/employers-and-advisers/plan-administration-and-compliance/reporting-and-filing/form-5500) forms used by plan administrators to satisfy various annual reporting obligations under ERISA and the Internal Revenue Code. Many health and welfare benefit plans that meet certain conditions do not have to file the Form 5500 Annual Return/Report. However, for those that do, EBSA publishes the forms used by plan administrators to satisfy various annual reporting obligations under ERISA and the Internal Revenue Code. The Form 5500 is filed and processed under the ERISA Filing Acceptance System (EFAST). Beginning with the 2009 plan year filings, there are changes to the Form 5500 and required electronic filing using the modernized EFAST2 System. For more information, see the EFAST Web site.

In addition, the Reporting and Disclosure Guide for Employee Benefit Plans(https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/our-activities/resource-center/publications/reporting-and-disclosure-guide-for-employee-benefit-plans.pdf) can be used as a quick reference tool for certain basic reporting requirements under ERISA.


Recordkeeping, Reporting, Notices and Posters (Retirement Plans)


Notices and Posters

Posters.  There are no Federal poster requirements.

Notices.  ERISA contains several notice requirements for retirement plans, such as the summary plan description, individual benefit statements, and the summary annual report.  The Reporting and Disclosure Guide for Employee Benefit Plans(https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/our-activities/resource-center/publications/reporting-and-disclosure-guide-for-employee-benefit-plans.pdf) has been prepared by EBSA with assistance from PBGC. It is intended to be used as a quick reference tool for certain basic disclosure requirements under ERISA.  Not all ERISA disclosure requirements are reflected in this guide. For example, the guide, as a general matter, does not focus on disclosures required by the Internal Revenue Code or the provisions of ERISA for which the IRS has regulatory and interpretive authority. 


Recordkeeping

ERISA contains recordkeeping requirements. An accurate recordkeeping system will track and properly attribute contributions, earnings and losses, plan investments, expenses, and benefit distributions. If a contract administrator or financial institution assists in managing the plan, that entity typically will help keep the required records. In addition, a recordkeeping system will help you, your plan administrator, or financial provider prepare the plan's annual return/report that must be filed with the Federal Government. For more information visit the Compliance Assistance page(https://www.dol.gov/agencies/ebsa/employers-and-advisers/small-business/compliance-assistance).


Reporting

EBSA, in conjunction with the IRS(http://www.irs.gov/) and the Pension Benefit Guaranty Corporation(http://www.pbgc.gov/) (PBGC) publishes the Form 5500 Annual Return/Report(https://www.dol.gov/agencies/ebsa/employers-and-advisers/plan-administration-and-compliance/reporting-and-filing/form-5500). The Form 5500 Annual Return/Report is used by plan administrators to satisfy annual reporting obligations under ERISA and the Internal Revenue Code.  Each year, pension plans are required to file the Form 5500 Annual Return/Report regarding their financial condition, investments, and operations. The instructions for the Form 5500 provide helpful information regarding the filing requirements.  The Form 5500 is filed and processed under the ERISA Filing Acceptance System (EFAST)(http://www.efast.dol.gov/).

In addition, the Reporting and Disclosure Guide for Employee Benefit Plans(https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/our-activities/resource-center/publications/reporting-and-disclosure-guide-for-employee-benefit-plans.pdf) can be used as a quick reference tool for certain basic reporting requirements under ERISA.


Penalties/Sanctions

ERISA confers substantial law enforcement responsibilities on the Department of Labor. Part 5 of Title I of ERISA gives the Department of Labor authority to bring a civil action to correct violations of the law, provides investigative authority to determine whether any person has violated Title I, and imposes criminal penalties on any person who willfully violates any provision of Part 1 of Title I.

EBSA has authority under ERISA Section 502 to assess civil penalties for a number of different violations. For instance, EBSA has authority under ERISA Section 502(c)(2) to assess civil penalties for reporting violations. A penalty of up to $1,100 per day may be assessed against plan administrators who fail or refuse to comply with annual reporting requirements. Section 502(i) gives the agency authority to assess civil penalties against parties in interest who engage in prohibited transactions with welfare and nonqualified retirement plans. The penalty can range from five percent to 100 percent of the amount involved in a transaction.

A parallel provision of the Code directly imposes an excise tax against disqualified persons, including employee benefit plan sponsors and service providers, who engage in prohibited transactions with tax‑qualified retirement plans.

Finally, Section 502(l) requires the Department of Labor to assess mandatory civil penalties equal to 20 percent of any amount recovered with respect to fiduciary breaches resulting from either a settlement agreement with the Department of Labor or a court order as the result of a lawsuit by the Department of Labor.


Relation to State, Local, and Other Federal Laws

Part 5 of Title I states that the provisions of ERISA Titles I and IV supersede state and local laws which "relate to" an employee benefit plan. ERISA, however, does not preempt certain state and local insurance, banking or securities laws, including state insurance regulation of multiple employer welfare arrangements (MEWAs). MEWAs generally constitute employee welfare benefit plans or other arrangements providing welfare benefits to employees of more than one employer, not pursuant to a collective bargaining agreement.

In addition, ERISA's general prohibitions against assignment or alienation of retirement benefits do not apply to qualified domestic relations orders. Plan administrators must comply with the terms of qualifying orders made pursuant to state domestic relations laws that award all or part of a participant's benefit in the form of child support, alimony, or marital property rights to an alternative payee (spouse, former spouse, child, or other dependent). Finally, group health plans covered by ERISA must provide benefits in accordance with the requirements of qualified medical child support orders issued under state domestic relations laws.


Compliance Assistance Available

EBSA has numerous general publications designed to help employers and employees understand their obligations and rights under ERISA. A list of EBSA booklets and pamphlets is available from EBSA's Home Page(https://www.dol.gov/ebsa) and through EBSA's toll-free publications line at 1-866-444-EBSA (1-866-444-3272).

EBSA's national offices(https://www.dol.gov/agencies/ebsa/about-ebsa/about-us/organization-chart) and field offices(https://www.dol.gov/agencies/ebsa/about-ebsa/about-us/organization-chart#section13) offer individualized assistance for persons seeking information and assistance on benefits and rights under employee benefit plans. EBSA also issues advisory opinions and information letters in response to requests from individuals and organizations. Advisory opinions apply the law to a specific set of facts, while information letters merely call attention to well-established principles or interpretations. Further information about these programs is contained in EBSA's booklet on "Customer Service Standards."

In addition, employee benefit plan documents and other materials are available from the EBSA Public Disclosure Room. This facility may be used to view and to obtain copies of materials on file. Materials include: Form 5500 Series reports, Apprentice and Other Training Plans notices, "Top Hat" plan statements, advisory opinions, exemptions, announcements, and transcripts of public hearings and proceedings. The EBSA Public Disclosure Room is open to the public Monday through Friday, from 8:30 a.m. to 4:30 p.m., except Federal holidays. Copies of materials are available at a cost of 15 cents per page by ordering in person or writing to:

U.S. Department of Labor
EBSA Public Disclosure Room
200 Constitution Avenue NW, Room N 1515
Washington, D.C. 20210.

Fax requests can be sent to 202-501-4098. Requests should include pertinent information to help find documents, such as titles and dates. For 5500 and report searches, the name of the company/entity, the type of plan, the nine-digit EIN and three-digit Plan Number, state, and year(s) requested should be provided. Also include the requestor's name, address, and contact information. Summary Plan Descriptions (SPD) are no longer filed with EBSA. The 1977-1998 collection of SPD records have been transferred to the Pension Benefit Guaranty Corporation (PBGC) and can be requested by submitting a request to spdrequest@pbgc.gov. Given the complexity of ERISA requirements, employers may wish to seek the assistance of an attorney, CPA firm, investment or brokerage firm, and other employee benefit consultants.

The Department of Labor provides employers and others with clear and easy-to-access information and assistance on how to comply with the Employee Retirement Income Security Act. Compliance assistance related to the Act, includes:


DOL Contacts

Employee Benefits Security Administration (EBSA)
Contact EBSA
Tel: 1-866-444-EBSA (1-866-444-3272); TTY: 1-877-889-5627

The Employment Law Guide is offered as a public resource. It does not create new legal obligations and it is not a substitute for the U.S. Code, Federal Register, and Code of Federal Regulations as the official sources of applicable law. Every effort has been made to ensure that the information provided is complete and accurate as of the time of publication, and this will continue.

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DEPARTMENT OF LABOR