This blog is a general overview of the requirements of employee benefit plans. 

What are employee benefits?

An employee benefit is any perk or additional benefit provided to employees in addition to their base salaries. This could include retirement benefits, health benefits, life insurance, paid time off and more. The benefit may be mandatory or voluntary.

Why do employers offer voluntary employee benefits?

Most employers use benefits as a recruiting tool, and many employees have come to expect these benefits. If your benefit line up outshines your competitors’ offerings, it could be the differentiating factor for acquiring and retaining top talent. In addition, it is a way to showcase a company’s culture of valuing and taking care of employees’ wellbeing.

What do employers need to know?

Employers need to be aware that retirement and health and welfare plans have their own deadlines, testing and compliance requirements. These rules are mainly determined and administered by the DOL and IRS. Title I of the Employee Retirement Income Security Act (ERISA) is administered by the Employee Benefits Security Administration (EBSA).

Employers should also be aware of the importance of the Plan Document; the Plan Document is the required guide to operating the plan, and it must be reviewed and understood. There are few items that can be changed in the document retroactively, and failing to follow the plan document could be costly.

The below actions should be performed by the Plan Fiduciary, who is usually the business owner or controller. 

• Managing plans for the exclusive benefit of participants and beneficiaries;
• Carrying out their duties in a prudent manner and refrain from conflict-of-interest transactions expressly prohibited by law;
• Complying with limitations on certain plans’ investments in employer securities and properties;
• Funding benefits in accordance with the law and plan rules;
• Reporting and disclosing information on the operations and financial condition of plans to the government and participants; and
• Providing documents required in the conduct of investigations to ensure compliance with the law.

Ignoring fiduciary duties can be a costly mistake. Additionally, many plans have required testing that should be performed regularly (usually annually). The type of testing, the timing of it and other details are determined by the plan type.

There are also rules regarding the continuation of benefits after termination of employment for certain employees and employers; for example, health coverage, as well as many requirements for recordkeeping, reporting and participant notices.

ERISA contains several notice requirements for health plans including, but not limited to, a Summary Plan Description (SPD), special enrollment notice and certificates of creditable coverage. Other notices required by COBRA, HIPAA or WHCRA may be required depending on the number of employees and the benefits offered by the plan.

The general recordkeeping requirement is seven years. It is important to have a system in place to track and properly attribute contributions, earnings and losses, investments, expenses and benefit distributions.

The Form 5500 Annual Return/Report is used by plan administrators to satisfy annual reporting obligations under ERISA and the Internal Revenue Code.  Each year, many pension plans are required to file the Form 5500 Annual Return/Report regarding their financial condition, investments and operations.

Many employers should have a fiduciary bond. An ERISA fidelity bond is a type of insurance that protects the plan against losses caused by acts of fraud or dishonesty. Fiduciary liability insurance, on the other hand, insures fiduciaries—and in some cases the plan—against losses caused by breaches of fiduciary responsibilities. Although many plan fiduciaries may be covered by fiduciary liability insurance, it is not required and does not satisfy the fidelity bonding required by ERISA. 

It is important to note that each state can have its own requirements as well.

What is the takeaway?

The DOL and IRS use ERISA and EBSA to provide guidance and requirements for employee benefits. It is essential for businesses to monitor these rules to stay in compliance and avoid costly issues. Having a dedicated employee to oversee these benefits is very helpful. However, if that is not an option, using benefits administration software can help cut costs. This software can also be used in addition to having a dedicated employee. Regardless of your approach, the rules and regulations surrounding benefits should be monitored regularly and consistently.

What if I need help administering these benefits?

If you employ a company or service provider for these benefits, check in with them regularly and whenever you have questions.

This is a brief overview of the requirements. If you would like additional information or have any questions, please contact Heather Smelley  at [email protected] or 312.670.7444. Visit ORBA.com to learn more about our Employee Benefit Plans Services.