1. ERISA Compliance For Welfare Benefit Plans
Presented by Trey Tompkins of Admin America, Inc.
To the South Atlanta Association of Health Underwriters
Thursday March 20,2014
East Point, Georgia
© 2014 Admin America, Inc.

2. What Every Agent Needs To Know About ERISA
What is ERISA?
What does ERISA do?
How is ERISA enforced?
Which employers are covered by ERISA?
Which types of plans are subject to ERISA?
What does ERISA require?
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3. But First… We Propose A New Source of Agent Income: Bar Bets
Did you know that the United States of America was once led by an unelected King?
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4. What is this new ERISA thing?
Part of the U.S. Code’s Labor Laws (Title 29)
Tax Laws are Title 26
51 Topical Based Titles
Regulated by DOL
Became law when Trey was five years old
Signed by President King
Leslie Lynch King, Jr.
Succeeded Vice President Spiro Agnew
Succeeded President Richard Nixon
Shortest Presidential Term To End Alive
Lived To Be Older Than Any Former U.S. President
Last Person To Defeat Ronald Reagan in an Election
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5. What does ERISA do? Governs the structure of “employee benefit plans”
Mandates detailed disclosures to plan participants
Requires government reporting of plan information for many types of benefit plans
Imposes fiduciary code of conduct on plan sponsors and plan administrators
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6. How is ERISA enforced?
Employee Benefits Security Administration (EBSA)
Enforcement actions and penalty assessments
Employee lawsuits
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7. Which Employers are covered by ERISA?
Virtually all private-sector employers
Nonprofits are covered
Governmental employers and churches are exempt
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8. Which types of plans are subject to ERISA?
Pension Plans
Welfare Benefit Plans
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9. What is a Welfare Benefit Plan?
A plan, fund or program
That is established or maintained by an employer
For the purposes of providing one or more benefits enumerated by ERISA
That is not otherwise excepted from Welfare Benefit Plan status
© 2014 Admin America, Inc.

10. What is a Welfare Benefit Plan?
A plan, fund or program
That is established or maintained by an employer
For the purposes of providing one or more benefits enumerated by ERISA
That is not otherwise excepted from Welfare Benefit Plan status
© 2014 Admin America, Inc.

11. What benefits are enumerated by ERISA?
Medical benefits
Sickness*, accident, death, disability* and unemployment benefits*
Vacation benefits*
Apprenticeship benefits
On-site day care benefits
Scholarship funds
Prepaid legal services
Holiday pay*
Severance pay benefits
House Assistance benefits
* Exceptions Apply

12. What are the statutory benefit exemptions?
Programs maintained solely to comply with state-law requirements related to benefits for:
Worker’s compensation
Unemployment compensation
Disability insurance
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13. What are the regulatory benefit exceptions?
Payroll practice exemptions
Voluntary (Employee Pay All) Plan exceptions
Other miscellaneous exceptions
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14. What benefits qualify for Payroll Practice Exemptions?
Must be paid from employer’s general assets
not through trusts or insurance contracts
Must be paid only to currently employed individuals
Not to former employees or family of former employees
Only for certain types of benefits
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15. Types of benefits eligible for Payroll Practice Exemptions?
Wages
Overtime pay
Shift premiums
Holiday pay
Sick pay
Vacation Pay
Income replacement benefits
Jury duty
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16. What situations qualify for the Voluntary Plan exception?
The Plan / Employer may:
allow employees to fund premium payments through payroll deductions
Forward employee premium deductions to the carrier
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17. What situations do not qualify for the Voluntary Plan exception?
The Plan / Employer may not:
Contribute towards the cost of the coverage
Receive payment for granting insurer access to workplace
Endorse the program
Record keeping
Allow payroll deductions to be made on a pre-tax basis (safe harbor)
© 2014 Admin America, Inc.

18. Recent Court Decisions Regarding the Voluntary Plan Exception?
Two Separate U.S. District Courts
the District of Maryland
the Eastern District of Tennessee
Ruled that use of Cafeteria Plans to pay premiums for voluntary plans did not in and of itself subject those plans to ERISA
Prior federal courts had ruled Cafeteria Plans are a factor to be considered among others in evaluating compliance with the Voluntary Plan Safe Harbor but had not addressed the issue so definitively.
© 2014 Admin America, Inc.

19. What benefits qualify for miscellaneous regulatory exceptions?
On site first aid clinics for on the job injuries
Tuition and education expense reimbursement plans paid out of general assets
Remembrance funds for sick or deceased employees and their family members
© 2014 Admin America, Inc.

20. Questions about covered benefits?
Speaker’s Prerogative: the ability to drop pictures you like into presentations you spend hours preparing.

21. What does ERISA require?
Written Plan documents
Distribution of Summary Plan Description and other participant disclosures
Rules regarding processing of claims for benefits (Next Time)
Annual Form 5500 reporting
Fiduciary obligations and bonding requirements (Next Time)
© 2014 Admin America, Inc.

22. What are the requirements of a written plan document?
Every ERISA benefit must be described in a written document
ERISA does not generally dictate :
contents of the plan document (except for certain required provisions)
the format of the plan document
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23. What constitutes a written plan document?
Insured carrier’s contract typically requires supplementation in order to satisfy ERISA’s written document rules
Supplemental information is commonly called a “Wrapper” or “Wrap Document”.
It is physically coupled with the insurance contract to form one plan document
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24. Physical components of a plan document for a fully insured plan
Wrap document
Insurance Contract (including)
Certificate of Coverage
Summary of Benefits
Application
Does the employer / plan sponsor have all of these?
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25. ERISA required items commonly missing from insurance contracts
Plan administrator designation
ERISA named fiduciary designation
Plan Name and Plan Number
Plan Year
Designation of how many plans the Plan Sponsor maintains
Treatment of insurer refunds
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26. ERISA required items commonly found in insurance contracts (but make sure)
Benefit descriptions
General employee eligibility provisions
Funding mechanism for benefits
Standard of review for benefit decisions
Required provisions for group health plans
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27. Additional provisions beneficial to include in a Wrap Document
Employer indemnification of employees who perform plan functions
Employer’s right to amend or terminate plan
Plan enrollment processes
Specific employee and dependent eligibility criteria
Employer / employee allocations regarding coverage costs
Subrogation provisions
© 2014 Admin America, Inc.

28. Plan Document Considerations: Bundling Pros and Cons
Plan Sponsor can bundle multiple benefit components under one plan document
Alternatively, separate plan documents can cover separate component benefits
Bundling reduces the number of plan documents to prepare and maintain
Unbundling helps smaller employers avoid Form 5500 filing requirements
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29. ERISA Mandated Participant Disclosures
Summary Plan Descriptions
Summaries of Material Modifications
Four-Page summaries of benefits
Other disclosure requirements
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30. Summary Plan Description Requirements
The most important document under ERISA
Often enforced over language found in plan document
Plan Administrator is liable for furnishing
Liability can be personal
No small plan exception
The trigger for ERISA’s statutory $110 penalty
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31. Enforcement of SPD Language
Employees are allowed to rely on terms of SPD
If there is no SPD, courts will look to other communications
including oral representations
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32. SPD Statutory Penalties
$110 per day for failure to provide within 30 days of written request by participant
Applies if incomplete SPD is provided
Penalty is discretionary with DOL and ultimately with federal judge
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33. Summary Plan Descriptions - Who
All participants covered under any ERISA welfare plan
COBRA Qualified Beneficiaries
Parent or guardian of child covered under a QMSCO
Spouse of a deceased retiree
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34. Summary Plan Descriptions - When
Within 120 day after new ERISA plan is established
Within 90 days after beginning of individuals coverage
Every 10 years for continuing participants
Every 5 years if there have been material changes
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35. Summary Plan Descriptions - How
In a manner calculated to ensure actual receipt
Using a method likely to result in full distribution
Electronic distribution can be okay
Facts and circumstances
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36. Summary Plan Descriptions - How
Properly addressed first class mail is always sufficient
Posting in a conspicuous place is never sufficient
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37. Summary Plan Descriptions - What
No specific format is required
Must be sufficiently accurate and comprehensive to inform participants of their:
Benefits
Rights
Obligations
© 2014 Admin America, Inc.

38. Summary Plan Descriptions - What
Must be written to be understandable by average plan participants
Avoid legalese
English as a Second Language issues
Can be the same document as the Plan Document
Can be wrapped around insurer’s certificate of insurance
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39. Summary Plan Descriptions – Must Include
Plan Name
Form 5500 Number
Plan Administrator Info
Agent for Service of Legal Process
Plan Year
Eligibility Provisions
Plan amendment and termination provisions
Subrogation provisions
Plan funding and contribution info
Claims procedures
Statement of ERISA rights
© 2014 Admin America, Inc.

40. Summary of Material Modifications
Used to communicate plan changes between issuing SPDs
Provided in the same manner and to the same individuals as the SPD
For group health plans, must be issued within 60 days of a change
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41. Four Page Summary of Benefits and Coverage (SBC)
New requirement under Health Care Reform
Required for plans that begin open enrollment periods on or after September 23, 2012
Required to be provided by insurers (or TPAs)
Material plan changes must be issued in SMM to participants 60 days before they may take effect (except at plan anniversary)
© 2014 Admin America, Inc.

42. Four Page Summary of Benefits and Coverage (SBC)
DOL has released a SBC Template to serve as a model
Single form may be used for:
multiple coverage tiers
different deductibles and co-payments
Plans with add-on coverages such as HRAs and FSAs
Plans with carve-out arrangements such as PBMs
© 2014 Admin America, Inc.

43. Four Page Summary of Benefits and Coverage (SBC)
May be provided electronically when
Format is readily accessible (MS Word, PDF)
Paper copy is available free upon request
Provided via an Internet posting
Participants are notified of availability
is okay for notice
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44. Summary of Benefits and Coverage (SBC)
In 2013, a good faith attempt at compliance standard was utilized by DOL to evaluate compliance
No official guidance has been provided regarding 2014 and later standards
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45. Other Required Disclosures
Notices of availability of documents
Summary Annual Reports
For plans that file Form 5500
Notice of Rescission of Group Health Plan Coverage
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46. ERISA Mandated Form 5500 Government Reporting
Annual reporting of plan information for welfare benefit plans
Each plan is required to file unless exempt
Small unfunded or insured welfare benefit plans are exempt from filing
small plans have less than 100 covered participants at the beginning of the plan year
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47. ERISA Mandated Form 5500 Government Reporting
Penalty for non-compliance is $1,100 per day
There is no statute of limitations
May only be enforced by DOL; not private individuals
DOL offers a voluntary compliance program; the DFVC which provides for substantially lower penalties for plans which voluntarily bring delinquent filings to DOL’s attention
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48. ERISA Mandated Form 5500 Government Reporting
Reporting for welfare benefit plans is simplified
No auditors report is required for most insured plans
All filing is now done electronically through specialized software – due 7 months after the end of the plan year (automatic extensions are available)
Free versions of the software are available as well as simpler paid versions and professional preparation services (much like in the 1040 return arena).
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49. Questions?