What qualifies as a voluntary benefit under ERISA?
Benefits such as critical illness coverage, hospital indemnity and other fixed indemnity coverage, as well as accident and disability coverage, can qualify for an ERISA exemption under this safe harbor. The key element in determining whether a plan is voluntary under ERISA is the level of involvement of the employer.
Are employee benefit plans subject to ERISA?
Most benefits offered by employers to employees through the worksite are employee benefit plans subject to ERISA. However, there is a safe harbor exception from ERISA for supplemental coverage if the employer provides payroll deduction for the cost of the policy but does not otherwise fund, endorse or sponsor the program.
Is there a safe harbor exemption from ERISA for voluntary plans?
There is a safe harbor exemption from ERISA for certain voluntary plans. Traditionally, the types of programs that may qualify as voluntary include life, vision, dental, disability, critical-illness and accident insurance plans.
What does it mean to be under ERISA?
By being under ERISA, there are restrictions for legal actions on claims to federal court and ERISA rules; additionally being under ERISA limits the ability of the plaintiff to utilize potentially more liberal state laws.
Are voluntary benefits ERISA plans?
ComplianceBug, LLC, a provider of online risk assessment and compliance monitoring tools, reported that more than 80 percent of worksite and voluntary benefits plans are actually subject to ERISA. This is despite employers believing the plans were exempt from compliance requirements under the safe harbor rules.
What benefits are not subject to ERISA?
ERISA generally does NOT apply to the following arrangements:Adoption assistance plans;Liability or casualty insurance plans;Health savings accounts (HSAs)—if the employer's involvement is limited and employee participation is voluntary;More items...
Is voluntary life subject to ERISA?
Most employee benefit plans offered through an employer are subject to ERISA. There is a safe harbor exemption from ERISA for certain voluntary plans. Traditionally, the types of programs that may qualify as voluntary include life, vision, dental, disability, critical-illness and accident insurance plans.
What type of employee benefits are covered under ERISA?
Which benefits does ERISA cover?medical, surgical, or hospital care.benefits for sickness, accident, disability, or death.unemployment benefits.vacation benefits.apprenticeship and training programs.day care centers.scholarship funds.prepaid legal services.More items...
What entities are exempt from ERISA?
The ERISA exemptions that do exist include: Insurance policies and benefits issued by government employers or entities. This includes local government, city government, state government and the federal government. If you work for the government in any capacity, your pension and benefits are likely not covered by ERISA.
Who isn't subject to ERISA?
Which Government Jobs Are Excluded From ERISA? ERISA only applies to private companies, so benefits offered by public employers at all levels—local, state, and federal—are exempt from these regulations. These public employees most likely have plans that aren't subject to ERISA: Teachers.
How do you know if your health plan is subject to ERISA?
The easiest way to find out whether you are enrolled in a self-funded ERISA plan or whether you are enrolled directly in the state-regulated HMO or insurance company is to ask your employer. At the time of this writing, Congress was considering adding consumer protections and mandated benefits to ERISA plans.
What type of employee welfare plans are not subject to ERISA regulations?
In general, ERISA does not cover plans established or maintained by government entities or churches for their employees, or plans which are maintained solely to comply with workers' compensation, unemployment, or disability laws.
What groups are subject to ERISA?
ERISA applies to private-sector companies that offer pension plans to employees. This includes businesses that: Are structured as partnerships, proprietorships, LLCs, S-corporations and C-corporations. No matter how your employer has structured his or her business, it is covered by ERISA if it is a private entity.
What are ERISA benefits?
The Employee Retirement Income Security Act (ERISA) of 1974 establishes minimum standards for retirement, health, and other welfare benefit plans, including life insurance, disability insurance, and apprenticeship plans.
Which employers are exempt from ERISA?
Employee benefit plans maintained by governmental employers are exempt from ERISA's requirements. This exemption includes plans maintained by the federal, state or local (for example, a city, county or township) governments. Church plans are also exempt from ERISA.
What is the difference between ERISA and non ERISA?
non-ERISA includes the employer's involvement. In an ERISA plan, an employer chooses the investment options, controls the deposit and timing of employee contributions and may also provide an employer matching contribution. In a non-ERISA plan, an employer is not involved except in compliance activities.
What is an ERISA plan?
An ERISA plan imposes administrative requirements on employers. Some benefits can avoid that designation if employers adhere to certain restrictions.
Can an employer endorse a plan?
Anything that suggests the employer is endorsing the plan moves the employer out of the safe harbor. The employer can't select an insurer, endorse a plan, negotiate the terms, or promote the plan in any way. Just including the plan in a list of benefits in Summary Plan Description (SPD) can be considered "endorsement.".
Can you pay for cafeteria benefits pre-tax?
Do not allow employees to pay for any voluntary benefits through your cafeteria plan pre-tax. Participation in the program must be voluntary for all employees. Limit your involvement with the voluntary plan to the following: allowing the insurer to publicize the program to employees, collecting premiums through payroll deductions and passing on ...
Is voluntary plan safe harbor exempt from reporting and notice requirements?
That is, the employer is in a safe harbor, exempt from the reporting and notice requirements associated with ERISA compliance, by adhering to them. Anything that suggests the employer is endorsing the plan moves the employer out of the safe harbor.
What is the demand for voluntary benefits spurred by the Affordable Care Act?
The demand for voluntary benefits spurred by passage of the Affordable Care Act has created potential compliance pitfalls for employers struggling to contain health care premium costs.
What is the role of broker in voluntary benefits?
Brokers play as indispensible a role as any other party in the delivery of voluntary benefits when it comes to educating employers on ERISA reporting requirements and the voluntary plan safe harbor.
What is voluntary safe harbor?
The Department of Labor’s voluntary plan safe harbor, which allows employers to avoid ERISA reporting requirements for voluntary benefits so long as certain conditions are met, could be misinterpreted as a comprehensive free pass for all voluntary products. Some aspects of the safe harbor are straightforward.
How much of the voluntary market is sold by health brokers?
According to data from Eastbridge Consulting Group Inc., 60 percent of the voluntary market is now sold by traditional group health brokers.
Can employers not comply with the voluntary safe harbor?
Even when employers are acting in good faith to comply with the voluntary safe harbor, “the DOL may decide that a voluntary plan does not satisfy the safe harbor ,” says Thomson Reuters. And that could mean employers would have to cough up fines and fees for not filing the compliance documents required under ERISA.
Is voluntary benefit an endorsement?
Given the uncertainty as to what employer action constitutes an endorsement of a voluntary benefit—it is imaginable that a court could view a mandatory meeting on voluntary benefits as an endorsement—the safest play for employers may be to treat voluntary benefits like their ERISA-covered traditional group plans.
Does ERISA increase compliance burdens?
Companies that already sponsor an ERISA-covered plan may not increase their compliance burdens excessively by offering voluntary benefits as ERISA-covered benefits.
What is ERISA 5500?
ERISA also imposes annual (Form 5500) reporting requirements on most plans.
What are the actions that are generally permitted under the voluntary plan safe harbor?
The following are some common employer actions that are generally permitted under the voluntary plan safe harbor: Permitting the insurer to publicize the program, such as through worksite presentations, including to come to the workplace to sign up employees for coverage directly with the insurer.
What are supplemental benefits?
Many employers make supplemental benefits such as critical illness coverage, hospital indemnity and other fixed indemnity coverage, as well as accident and disability coverage, available to their employees. These benefits are commonly referred to by employee benefits advisors, insurers, and brokers as supplemental or “voluntary” benefits ...
Is critical illness covered by ERISA?
Benefits such as critical illness coverage, hospital indemnity and other fixed indemnity coverage, as well as accident and disability coverage, can qualify for an ERISA exemption under this safe harbor. The key element in determining whether a plan is voluntary under ERISA is the level of involvement of the employer.
Does employer contribution take the plan out of the safe harbor?
Any employer contributions take the plan out of the safe harbor. Pretax salary reduction contributions through a cafeteria plan also likely take the arrangement out of the safe harbor, although there is somewhat mixed guidance on this issue. Participation in the program is completely optional for employees.
Is ERISA a safe harbor?
Most benefits offered by employers to employees through the worksite are employee benefit plans subject to ERISA. However, there is a safe harbor exception from ERISA for supplemental coverage if the employer provides payroll deduction for the cost of the policy but does not otherwise fund, endorse or sponsor the program. ...
What are employer sponsored benefits subject to ERISA?
ERISA generally applies to the following benefit plans and fringe benefits, whether they are fully insured or self-insured: Medical, Surgical, Hospital, or HMO Group Insurance Plans. Health Reimbursement Accounts (HRAs)
Is sick pay exempt from payroll?
Certain self-insured or uninsured plans, such as sick pay, short term disability, paid time off, overtime, jury duty, and vacation pay, may be exempt if benefits are paid: as a “normal payroll practice,”.
Is a voluntary plan a group plan?
A voluntary individual or group insurance plan qualifies under the Voluntary Plan Safe Harbor if: it is funded by group or group-type insurance, it is completely voluntary, there are no employer contributions, AND the employer does not endorse the plan.
Does ERISA apply to cafeteria plans?
ERISA generally does not apply to: Cafeteria plans, §125 Plans, POPs (Premium Only Plans), Premium Conversion Plans, Pre-tax Premium Plans (However, the benefits funded by them are often subject to ERISA. NOTE: These plans must be referenced in the plan document and SPD if they are funding an ERISA Plan)
Does Aflac pay for critical illness?
Smith Company permitted Aflac to publicize to its employees a Critical Illness benefit. This benefit is also 100% paid by the employee. However, the critical illness benefit For Smith Co. is not to be part of the Benefit Plan nor is it reported in the 5500.
Is a voluntary benefit to be reported?
Some Voluntary Benefits are to be reported and others are not. For example: ABC Company offers an Aflac Critical Illness benefit and is to be reported in the Form 5500 (even though the participant pays 100% of the premium). In contrast.
