The 1960s were all about production efficiencies. It was an era when the greater the production, the greater the market share a company had. So these were simpler times when companies just focused on improving productivity and putting up new plans.
Then came the 1980s when companies faced increased competition because of globalization. The rapidly emerging startups were a threat to large multinationals. Therefore, they resorted to a strategy of acquisitions and mergers. This was the time when the top management and the marketing departments soared.
Now, when the talent market is showing increased competition and employers are fiercely competing for the best talent, HR, and its strategies to attract the best of the best is ruling the corporate world. In this scenario, retirement benefits are a part of the compensation strategy that employers offer to employees.
However, many employers might only reveal that their employees will be offered a retirement benefit plan, but do not fully disclose the details of the plan if it weren’t for the compliance requirements by ERISA. After all, these benefits are an expense for an organization, and they would try their level best to minimize these expenses.
What Is ERISA Compliance?
Under the Employee Retirement Income Security Act of 1974 ERISA, companies that offer retirement benefits to their employees need to comply with the guidelines. This helps regulate the benefits offered to the employees and protect their interests of the employees.
Because of the ERISA compliance, organizations or plan sponsors are required to provide detailed information to the participants. This includes a complete awareness of the options and the benefit utilization processes.
This compliance also assures that the sponsor ensures the protection of the funds and protects the employee under the circumstances that the company goes bankrupt. Maintaining compliance with the guidelines provided by ERISA is a requirement under federal law.
All employers except government entities and churches are required to meet the stipulations by ERISA.
Complying with ERISA means that the stipulations outlined should be met with the utmost discretion. Whether the company offers welfare benefits to the employees or retirement plans, they must follow these stipulations along with the administrative requirements to stay compliant with the ERISA requirements completely.
The following stipulations are supposed to be met by the employers under ERISA:
- The information pertinent to the plans should be disclosed to and easily accessible to the participants.
- The documentation which has the details of the plans should be sent to the employee
- Clear instructions should be provided to the employees for the process of claiming the benefits.
- The retirement plans should have a diversified portfolio of investments to assure that the funds are protected in case a couple of investments don’t yield.
- The employees should be regularly updated with documentation to clarify any loss or gain that has been attained.
While welfare programs are covered under the ERISA, there are stricter requirements for retirement plans since employees are not clear about the investments made under the plans and the claim of funds.
To stay compliant regarding welfare plans, companies usually disclose all the information to participants in the onboarding process when they are hired.
Administrative Requirements Under ERISA
Under the ERISA, the administrative requirement is that the HR or any other team handling these benefits should assure that the specified stipulations are met by all the programs offered. The main reason for this requirement is to minimize any burden on the employees to verify the plans and track down the investment details. As a result, the programs are transparent. Many companies opt for insurance companies to meet the administrative requirements of the ERISA.
The compliance requirements fall under three main categories: disclosure, reporting, and paying the claims. Here is a detail about each of the ERISA categories:
ERISA requires employers or administrators and sponsors of the program to disclose the information pertinent to the plans. The employees should be aware of the coverage, the levels available, and their eligibility.
Under disclosure, the employer is also required to include statements and any financial reports that are pertinent to the plans.
The ERISA requires the sponsor to pay the claims that have been made. This means that the employer should offer information about the process to claim the benefits from retirement or other funds like medical insurance.
This is required so the employees are aware of what processes to follow and how to make claims.
Along with the information, the companies need to file documents and forms to prove their compliance. The next section of this article lists the forms and documentation filing dates and details.
All private organizations that offer benefits to their employees like health coverage, insurance benefits, and drug coverage are supposed to comply with all three sections of the ERISA.
Complying with the ERISA Requirements
ERISA protects the employees covered under several plans including medical insurance, paid time off, sick leaves, unemployment benefits, scholarships, the assistance of daycare, and finally retirement plans like the 401(k).
Here are the forms and other requirements that need to be filled out to stay compliant with ERISA:
- Creditable Coverage Disclosure to CMS (March 2nd)
Organizations providing coverage for self-administered drugs are required to fill out the creditable coverage disclosure to the CMS.
By 2nd March, organizations are required to file it. This disclosure aims to make the process more transparent for the employees and the ERISA.
- Annual Funding Notice to Retirement Plan Participants (April 30th)
Under this requirement, the employer is required to submit the information and documentation regarding the funding of retirement plans. These details should be submitted to the employees and any other labor organizations that are involved in the process like labor unions in the organization.
- Form 5500 or Form 5558 (July 31st)
Form 5500 is filled out to report the investments of the retirement plan to the IRS. This report also assures that the investment is compliant with the laws and the guidelines given by the ERISA.
Form 5558 is for requesting an extension for filing form 5500. A maximum of 2.5 months of extension can be granted if form 5558 is submitted.
Here are more details about forms 5500 and 5558 from the official ORS website.
- Form 8955-SSA Filing Deadline (July 31st)
This form is to be filled out for the recipients of the retirement benefits who have terminated employment. This form is to notify the IRS about any vested benefits owed to these employees. The deadline for filling out this form is 31st July.
- RDS Application Due to CMS (October 3rd)
Many employers also offer a Retiree Drug Subsidy (RDS) to their employees. Under this, the employees are offered generous coverage on medicines and drugs even after their retirements.
If the RDS is filled by 3rd October, the employees can avail the benefits of the plan by January 1st of the next year.
- Enrollment for Marketplace Health Insurance Begins (November 1st)
On the 1st of November 2022, the enrollment for healthcare plans will begin for the next year. This means that the employer must ascertain the healthcare requirements of its employees and select a plan that fits their needs.
This coverage will help offer healthcare plans to the employees who were promised to them and for which they are eligible under the law.
Summing it Up
The ERISA is a vital act under which employers are required to disclose, pay claims, and report the details to employees and the ERISA. The stipulations of the ERISA are clear and this article offers details regarding all the forms that must be submitted under the reporting section of the administrative requirements by the ERISA.
While this is an added task for HR, it is to assure that the employees are well-aware of the benefits. Apart from the benefit that the organization is compliant, disclosure and a transparent process is also a contributor to employee satisfaction. So, it delivers two benefits which are a win-win for HR.