The 5 W’s of the ERISA Wrap

Under the Federal Employee Retirement Income Security Act (ERISA), an employer that provides certain benefits to their employees is considered to have established an “employee welfare benefit plan,” whether it is medical insurance or other types of benefit plans. When an employer provides a welfare benefit plan it is required that the employer comply with ERISA, but what does that mean?


The BASE® ERISA Wrap is designed to help employers fulfill the ERISA requirements for an SPD and Plan Document. These documents “wrap” around the insurance policy and together comprise of the complete Plan Document. These documents specify things such as eligibility requirements, plan participation rules, and the length of coverage.


WHO is required to have an ERISA Wrap?

An employer of any size, with any number of employees, and an “employee welfare benefit plan” must comply with ERISA.


WHAT does an ERISA Wrap do?

The ERISA Wrap will “wrap” around existing certificates of insurance and benefit plan booklets to provide the required provisions and information necessary to comply with ERISA. An ERISA Wrap helps to provide more detailed information about the benefits being offered and are designed to supplement the existing insurance carrier certificates with all required ERISA language. These documents provide additional legal protection for the employer and plan fiduciaries and help to simplify plan administration.


WHEN is an employer-provided benefit considered an “employee welfare benefit plan” under ERISA?

As an employer, if they provide a medical, dental, and vision insurance plan, or a health reimbursement arrangement (among other things), the benefit is now considered an employee welfare benefit plan that needs to comply with ERISA.


WHERE can an audit happen?

An ERISA audit can happen anytime, anywhere. The US Department of Labor (DOL) plans to conduct more ERISA compliance audits which can be at random or when a complaint has been made. According to HR Service Inc., the DOL estimates three out of four plans they audit have an ERISA violation, and about 70% of audits with violations have resulted in monetary fines to the employer.


WHY does a business need a wrap document?

Insurance documents rarely meet all of the specific requirements of ERISA for Plan Documents and SPDs. A business could face a penalty of up to $110 per day per employee that may be assessed where an employer fails to provide the proper plan documents to an employee. Having an inaccurate or incomplete plan document can increase the risk of participant complaints and lawsuits.


…and HOW does it work?

With BASE®, the employer provides the plan information for all ERISA employee benefit plans. BASE® will produce all required documentation as established by ERISA in the form of an SPD and Plan Document, and provide and maintain all documentation to the employer required for distribution to their employees.


The DOL recommends a third-party to help review a company’s compliance materials, and with the increased DOL audits, rest easy knowing BASE® can help keep the business in compliance. Call 1-888-386-9680.