ERISA News & Views  -  March 2010

Selling Voluntary Benefits Could Set
 Involuntary ERISA Trap for Employers
 
With the cost of medical insurance continuing to rise, employers are increasingly cutting benefits and offering voluntary insurance plans to their employees.  Brokers are discovering that selling voluntary benefits can add a lucrative supplemental source of revenue.  However, sponsoring a voluntary benefit program can set a trap for an unwary employer under ERISA.
 
There are relatively few activities an employer may perform in order to avoid ERISA; it may permit an insurer to publicize the Plan, collect premiums by payroll deduction, and remit them to the insurer.  
However, the typical activities of an employer or broker interested in a successful Plan with high participation could make his voluntary Plans subject to ERISA.  
 
Employers often promote the voluntary program in their newsletters and send letters to employees on company stationary to stimulate interest.  Enrollment kits are typically sent to employees' homes in company envelopes.  Employers usually hold group meetings their break rooms.  Some employers even schedule mandatory one-on-one meetings for each employee to hear a short presentation.  Non-participating employees may need to sign a waiver. 
 
Employers typically permit certain voluntary insurance premiums to be paid through their  Cafeteria Plans.  An employer might select the insurer, negotiate Plan terms, link coverage to employee status, allow the use of its name on correspondence, associate the voluntary Plan with other employer Plans, recommend the Plan to employees, state that ERISA applies, or assist employees with claims or disputes.  One or more of these activities may subject the voluntary Plan to ERISA reporting and disclosure requirements.
 
If a voluntary plan is deemed to be an ERISA Plan, the employer is required to have a written Plan Document and distribute SPDs to its Participants.  If the Plan has 100 or more Participants on the first day of the Plan Year, the employer must also file a Form 5500 and deliver a Summary Annual Report (SAR) to its Participants. 
 
ERISA Compliance may seem like a great deal of complication and cost, but it is modest compared to the benefits of a successful - and compliant - voluntary insurance program to the employer, its employees, and the broker.  Let ERISAPros show you how to do it right!
 
 
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© 2017 ERISAPros, LLC, All rights reserved. Information on ERISAPros' website, its newsletter, “News & Views,” and its blog, “ERISA Wonk,” is published as a general informational source. Information and articles are general in nature and are not intended to constitute legal or tax advice in any particular matter. Blog posts and comments reflect the personal views of their respective authors - not those of ERISAPros. Transmission of this information does not create an attorney-client relationship. ERISAPros, LLC is not a law firm and is not giving legal or tax advice. It does not warrant and is not responsible for errors or omissions in the content on its website or in its newsletters. ERISA is a complicated and confusing law. Summary Plan Descriptions (SPDs), Wrap Plan Documents, and Form 5500s require review and updating by qualified ERISA compliance professionals.

 

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