If you’ve ever felt lost in a maze of confusing HR terms, you’re not alone. ERISA might sound like just another government acronym, but understanding what it means could save your business from big fines and legal trouble.
What is ERISA, Anyway?
ERISA stands for the Employee Retirement Income Security Act, a federal law passed back in 1974. Its main job is to protect your employees’ retirement and health benefits. Think of it like a rulebook that makes sure workers actually get the benefits they’ve been promised. It sounds pretty straightforward, but for business owners, following those rules can get a little tricky.
What Does ERISA Cover?
ERISA applies to most employee benefit plans that you offer as an employer. That includes:
- 401(k) plans
- Pension plans
- Health insurance plans
- Group life or disability insurance in many cases
But not everything is covered. For example:
- Government and church plans are usually exempt.
- Workers’ comp plans aren’t covered.
- Individual insurance policies your employees buy on their own (even if you help by taking the money out of their paycheck) don’t fall under ERISA either.
Why does this matter? Because it determines which plans you’re legally responsible for managing under ERISA rules.
And here’s something that surprises a lot of small business owners: even a simple group life or disability policy might trigger ERISA rules without you realizing it.
What Are My Responsibilities as an Employer?
If your business offers a benefit plan covered by ERISA, you have a few key responsibilities to keep things compliant:
Share Plan Info Clearly
You need to give employees a Summary Plan Description. This a basic guide that explains what the plan offers, how it works, and how to file a claim.
Have a Claims & Appeals Process
Employees need a clear way to request benefits and appeal decisions. You’ll need to set up timelines and keep communication open and fair.
Be a Responsible Fiduciary
This means you’re legally required to act in the best interest of your employees when managing benefit plans. That includes picking trustworthy service providers, watching out for high fees, and keeping records of your decisions.
Keep Good Records
You need to hang on to plan-related documents for at least six years. Employees have the right to request and review them.
Avoiding Common ERISA Mistakes
Even well-meaning business owners can slip up. Here are some common trouble spots:
- Forgetting to update plan documents when you change benefits. Even a small tweak can require formal updates to stay compliant.
- Missing deadlines for sending notices or responding to claims. ERISA has strict timelines, and late responses can lead to penalties.
- Not understanding fiduciary responsibilities. If you’re involved in choosing or managing benefit plans, you need to understand your legal duties and document how decisions are made.
Why Getting ERISA Right Matters
Following ERISA isn’t just about avoiding fines. It’s about building trust with your team and showing them you take their benefits seriously.
Yes, it can feel overwhelming at times. But it shouldn’t stop you from offering great benefits. With the right help, you can check all the boxes without getting bogged down in red tape.
That’s where working with experienced HR professionals comes in. They can help you manage documentation, deadlines, and compliance so you can focus on running your business.
Stay Compliant and Confident with Commonwealth Payroll & HR
At Commonwealth Payroll & HR, we know ERISA inside and out. Our HR Services team works with businesses like yours to make sure benefit plans are compliant and responsibilities are clear.
From reviewing your current plans to helping you set up smart fiduciary practices, we’re here to support you every step of the way. Reach out to us to see how our HR Services can help you protect your business and take care of your people.
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