What is ERISA and what plans are subject to ERISA?
The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for most voluntarily established pension and health plans in private industry to provide protection for individuals in these plans. ERISA applies to both retirement and health and welfare plans. With health and welfare plans, ERISA applies to any plan that is a “group health plan” that provides medical care.
Examples of plans that are subject to ERISA include, but are not limited to:
- Short Term Disability
- Long Term Disability
- Health Flexible Spending Account
- Health Reimbursement Arrangement
- Pre-Paid Legal
- Certain wellness programs, employee assistance programs, on-site clinics, and telemedicine programs
What plans are exempt from ERISA?
Church and governmental plans are not subject to ERISA. Additionally, other benefits and programs, such as workers’ compensation, unemployment compensation, state-mandated disability, plans maintained outside of the U.S. for non-resident aliens, and payroll practices are exempt from ERISA.
There are certain group health plans that would be subject to ERISA, but may qualify for the voluntary plan safe harbor. If a plan meets the voluntary plan safe harbor requirements, then despite being a group health plan, it will not be subject to ERISA.
Voluntary benefits are generally exempt if:
- No employer or employer organization contributions
- Participation is completely voluntary
- No employer consideration, except for reasonable compensation for administration of the plan
- No employer endorsement of the plan
- For most employers, whether or not the plan meets the voluntary plan safe harbor will hinge on whether or not the employer endorses the plan
Examples of employer endorsement include, but are not limited to:
- Allowing employee premiums through the cafeteria plan
- Assisting employees with claim filing
- Listing the plan(s) among the employer’s other benefits
- Including the employer’s logo on plan materials
- Negotiating plan terms or design
- Urging or encouraging employee participation
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