Reporting & Disclosure Requirements for ERISA
For employers to comply with ERISA reporting requirements, they must understand what needs to be disclosed and when deadlines are set by the Department of Labor (DOL).
This article will outline the fundamental obligations for employers under ERISA and some key points about Form 5500, which is due annually from every plan sponsor in America.
What is ERISA, and who does it apply to?
The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that provides guidelines on how companies should operate employee benefit plans. ERISA also regulates the administration and management of retirement benefits and health plans.
Private employers who offer pension or other retirement benefits to their employees, including self-employed individuals, are subject to ERISA regulations. ERISA does not extend to group health plans provided by local, state, or federal governments, nor does it apply to not-for-profit entities such as churches.
ERISA has been amended to include the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) and the Health Insurance Portability and Accountability Act of 1996 (HIPAA). COBRA gives workers the right to continue health coverage after losing a job or other qualifying event. HIPAA gives protections to workers and their families who might be discriminated against based on individual health factors.
Other significant amendments include the Newborns’ and Mothers’ Health Protection Act, the Women’s Health and Cancer Rights Act, the Affordable Care Act, and the Mental Health Parity and Addiction Equity Act.
What disclosures are required?
ERISA requires plan administrators to provide individuals participating in health benefit and retirement plans with plan information. Plan information includes:
- Plan rules,
- Financial information, and
- Operating documents for managing the plan.
Some documents the plan administrator automatically sends to participants, while others are available upon request.
The Summary Plan Description (SPD) is automatically sent to participants and beneficiaries within 90 days of coverage. The SPD explains:
- What the plan provides,
- How the plan operates,
- When an employee can begin participating, and
- How to file a claim for benefits.
If a plan is changed, a Summary of Material Modification (SMM) is automatically given to the participants. Plan administrators have up to 210 days after the plan year ends in which the change occurred to provide an SMM.
Plans also must include a Summary of Benefits and Coverage (SBC), which includes essential features of the plan. SBCs are provided when first getting coverage, when coverage renews, and upon request. All requests to receive SBCs must be in writing.
What are the reporting requirements?
The Department of Labor, the Pension Benefit Guaranty Corporation, and the Internal Revenue Service administer and enforce ERISA. Together they developed Form 5500, Annual Return/Report of Employee Benefit Plan, to satisfy annual reporting requirements under Title I and Title IV of ERISA and the Internal Revenue Code.
Source: U.S. Department of Labor
Plan sponsors must file Form 5500, schedules, and attachments by the last day of the 7th calendar month after the end of the plan year. So, if your plan year ends December 31, you have until July 31 to file Form 5500 along with any required information. If the filing date falls on a weekend, you have until the next business day to file.
If you need extra time to file, use IRS Form 5588, Application for Extension of Time to File Certain Employee Plan Returns. Doing so will give you or the plan administrator a one-time extension of 2 ½ months.
All Form 5500 reports and returns must be filed electronically through the ERISA Filing Acceptance System (EFAST2).
What are the penalties for not reporting on time?
ERISA protects retirement savings and benefit plans from mismanagement and abuse. Those in charge are held to a high standard; they are fiduciaries who must act in the best interests of plan participants. Accountability and transparency are paramount, so participants have access to information about their plans.
There are stiff penalties for those who fail to comply with the DOL’s filing requirements:
- Failing to file a complete and accurate report could result in a penalty of up to $2,259 per plan per day.
- Any individual who willfully violates any provision of Part 1 Title 1 of ERISA is subject to a fine of up to $100,000 or jail time of up to 10 years, or both.
The penalties for not reporting on time can be severe. All businesses with employee benefit plans must understand their responsibilities and obligations under ERISA and any consequences they might face should they fail to fulfill them.
ERISA is an important piece of legislation that profoundly impacts your company’s retirement and investment plans. It’s essential to understand what it covers, how the law applies to you, and when it comes time for reporting requirements. You don’t want any surprises to come your way!