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ERISA News & Views - March 2010 |
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Selling Voluntary Benefits Could Set
Involuntary ERISA Trap for Employers
With
the cost of medical insurance continuing to rise, employers are
increasingly cutting benefits and offering voluntary insurance plans to
their employees. Brokers are discovering that selling voluntary
benefits can add a lucrative supplemental source of revenue.
However, sponsoring a voluntary benefit program can set a trap for an
unwary employer under ERISA.
There are relatively few
activities an employer may perform in order to avoid ERISA; it
may permit an insurer to publicize the Plan, collect premiums
by payroll deduction, and remit them to the insurer. However,
the typical activities of an employer or broker interested in a
successful Plan with high participation could make his
voluntary Plans subject to ERISA.
Employers
often promote the voluntary program in their newsletters
and send letters to employees on company stationary to stimulate
interest. Enrollment kits are typically sent to employees'
homes in company envelopes. Employers usually hold group
meetings their break rooms. Some employers
even schedule mandatory one-on-one meetings for each
employee to hear a short
presentation. Non-participating employees may need to sign a
waiver. Employers typically
permit certain voluntary insurance premiums to be paid through
their Cafeteria Plans. An employer might select
the insurer, negotiate Plan terms, link coverage to employee
status, allow the use of its name on correspondence,
associate the voluntary Plan with other employer Plans, recommend the
Plan to employees, state that ERISA applies, or assist employees
with claims or disputes. One or more of these activities may
subject the voluntary Plan to ERISA reporting and disclosure
requirements.
If a voluntary plan is deemed to be an ERISA Plan, the employer is required to have a written Plan Document and distribute SPDs
to its Participants. If the Plan has 100 or more
Participants on the first day of the Plan Year, the employer must also
file a Form 5500 and deliver a Summary Annual Report (SAR) to its Participants.
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Wrap-TightSM
SPDs &
Form 5500s
for
Health & Welfare
Benefit Plans
Call Us:
678-443-4003 or
1-866-488-6582 toll free
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© 2012 ERISA Pros, LLC, All rights reserved. Information on ERISA Pros' website, its newsletter, “News & Views,” and its blog, “ERISA Wonk,” is published as a general informational source. Information and articles are general in nature and are not intended to constitute legal or tax advice in any particular matter. Blog posts and comments reflect the personal views of their respective authors - not those of ERISA Pros. Transmission of this information does not create an attorney-client relationship. ERISA Pros, LLC is not a law firm and is not giving legal or tax advice. It does not warrant and is not responsible for errors or omissions in the content on its website or in its newsletters. ERISA is a complicated and confusing law. Summary Plan Descriptions (SPDs), Wrap Plan Documents, and Form 5500s require review and updating by qualified ERISA compliance professionals.
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