The Employee Retirement Income Security Act (ERISA) establishes standards to protect employees’ benefits, including retirement and health plans. Compliance with ERISA is essential for employers offering benefits, as it not only ensures the security of employees’ financial futures but also shields businesses from potential legal and financial penalties. As navigating ERISA can be complex, SolveHR is here to help clarify employer responsibilities to ensure your benefit plans meet federal guidelines. 

What is ERISA? 

ERISA is a federal law that governs employer-sponsored benefit plans, including retirement plans (such as 401(k)s) and health insurance. ERISA sets guidelines on plan funding, vesting, fiduciary responsibilities, and reporting requirements to protect the interests of employees. While ERISA doesn’t mandate that employers provide benefits, if they do, they must comply with ERISA’s standards for those benefits. 

Why ERISA Compliance Matters for Employers 

Compliance with ERISA isn’t just a legal formality—it builds trust with employees, shows a commitment to their financial well-being, and minimizes the risk of legal consequences for the company. Non-compliance can result in penalties, increased scrutiny from the Department of Labor (DOL), and potential lawsuits from employees. 

Key ERISA Compliance Responsibilities for Employers 

1. Plan Document and Summary Plan Description (SPD) 
   • What It Is: ERISA requires that employers create a formal written plan document and an SPD, which outlines the benefits, eligibility requirements, claims procedures, and participant rights. 
   • Why It Matters: The SPD is the primary communication tool that informs employees of their benefits and their rights under the plan. Failure to provide or accurately update the SPD can result in penalties. 
   • SolveHR Tip: Ensure your SPD is comprehensive, accessible, and regularly updated to reflect any plan changes. Consider consulting with a benefits specialist to ensure it meets legal standards. 
2. Fiduciary Responsibility 
   • What It Is: ERISA imposes fiduciary responsibilities on those who manage and control plan assets, requiring them to act solely in the interest of plan participants. 
   • Why It Matters: Fiduciaries are held to high standards of conduct and can be personally liable for losses if they fail to meet these standards. This includes ensuring fees are reasonable and investments are in the best interest of participants. 
   • SolveHR Tip: If you’re a plan fiduciary, consider conducting regular audits of the plan’s fees and investment options to ensure compliance. SolveHR can assist with understanding and managing fiduciary obligations. 
3. Reporting and Disclosure Requirements 
   • What It Is: Employers must file certain documents with the government, such as Form 5500, and disclose plan information to participants. 
   • Why It Matters: Timely reporting is essential to comply with ERISA and to avoid penalties. Form 5500 provides financial information about the plan to both the government and participants. 
   • SolveHR Tip: Establish a calendar for all reporting deadlines, especially for annual filings like Form 5500, to avoid missed deadlines. Working with an ERISA specialist can simplify the reporting process. 
4. Benefit Claims Process and Appeals 
   • What It Is: ERISA requires that employers have a fair and transparent process for handling benefit claims and appeals, providing clear timelines and procedures for participants. 
   • Why It Matters: Failing to establish a compliant claims process can lead to disputes and penalties, while clear procedures help employees understand their rights and avoid misunderstandings. 
   • SolveHR Tip: Ensure your claims and appeals process is documented in the SPD, and that your team is trained on these procedures. This clarity helps employees know what to expect when they file a claim. 
5. Timely Deposit of Contributions 
   • What It Is: ERISA mandates that employee contributions to retirement plans, such as 401(k)s, are deposited in a timely manner, typically within a few days after they are withheld. 
   • Why It Matters: Delayed deposits can be considered a misuse of funds, potentially resulting in penalties and liability for the business. 
   • SolveHR Tip: Establish a process to deposit employee contributions as soon as possible, ensuring compliance with ERISA’s timelines and avoiding penalties. 
6. Non-Discrimination Testing 
   • What It Is: ERISA includes non-discrimination rules to ensure that benefit plans don’t favor highly compensated employees over others, particularly in retirement plans. 
   • Why It Matters: If your plan fails these tests, you may have to make adjustments, such as additional contributions to employees’ accounts, or risk losing the plan’s tax-advantaged status. 
   • SolveHR Tip: Perform non-discrimination testing annually, and consult with a benefits specialist to make adjustments if necessary. SolveHR can help you navigate the rules to keep your plan in compliance.
     

ERISA Compliance Challenges for Employers 

Compliance with ERISA can be particularly challenging due to frequent regulatory updates and the complexities of fiduciary responsibilities. Many businesses face difficulties in keeping up with reporting deadlines and understanding the nuances of fiduciary duty. Additionally, even minor oversights in benefit plan documentation or claims processes can lead to significant penalties. 

Penalties for ERISA Non-Compliance 

ERISA non-compliance can result in steep penalties, such as: 

• Failure to provide an SPD or timely reporting: Up to $110 per day per participant. 

• Fiduciary breaches: Personal liability for plan losses, plus possible civil penalties. 

• Late Form 5500 filing: Penalties up to $2,259 per day. 

These penalties emphasize the importance of understanding and meeting ERISA requirements to protect both your business and your employees. 

How SolveHR Can Help with ERISA Compliance 

SolveHR specializes in helping businesses navigate ERISA requirements and manage their employee benefit plans. From setting up compliant benefit structures to conducting non-discrimination testing, our team offers a comprehensive approach to support your ERISA compliance efforts. We’ll work with you to create and maintain required documents, conduct plan audits, and stay on top of regulatory updates so you can focus on what matters most—growing your business. 

Understanding ERISA compliance is essential for any employer offering benefit plans. By staying informed about your responsibilities, from fiduciary duties to reporting requirements, you can avoid costly penalties and provide valuable, compliant benefits to your employees. If you need help navigating ERISA or want to ensure your benefit plans are fully compliant, contact SolveHR. We’re here to help you create a secure, supportive benefits structure that meets all regulatory requirements.