The Labor Department changed Title I ERISA reporting requirements in the 1990s by eliminating the mandatory Form 5500 filing for health and welfare groups with fewer than 100 plan participants. A few years ago, they dropped the same requirement for cafeteria plans too.
Many employers of this size seemed to think that the disclosure requirements of Title I of ERISA also went away. Not true. Employers with fewer than 100 plan participants in insured or self-funded plans need to comply with ERISA's disclosure requirements, but few do.
Two ways exist for complying with ERISA's disclosure requirements for the under-100 market. First, let us identify what you must tell your employers in this group to provide employees: An annual overview, upon request, of the plan document for each health and welfare benefit; an SPD; an SBC; a uniform glossary of terms; an SMM; and an SAR. A few other miscellaneous and minor disclosures exist, but these are the biggies.
Failure to provide these disclosures to plan participants is not cheap if you are caught, and the DOL is out doing audits. I know many employers that the DOL slapped with fines for non-compliance with ERISA's disclosure requirements. The fines are stiff. Failure to provide any of the disclosure documents listed costs $110 per day, per participant with a single contract for every day of non-compliance. That fine jumps to $200 per day, per participant with a family contract for every day of non-compliance.
The fines for the disclosure requirements like SPDs, SMMs and an annual review of the plan document are tax-deductible. However, the fines for the ACA items like the SBC and uniform glossary of benefit terms are not tax-deductible.
How to comply
Plan sponsors have two ways to deliver ERISA disclosure documents. The first method is the original method contemplated by the authors of ERISA: Write a separate document for each plan and distribute the document to plan participants according to a prescribed schedule.
That is the hard way. More recently, the Labor Department allowed plan sponsors to issue wrap documents for plan participants. These are particularly appropriate for employers with insured plans.
With a wrap document, you write a plan document for each benefit. Next write an SPD for each ERISA benefit. Then get a certificate of insurance from the carrier or a copy of the master contract. ERISA permits you to take all your SPDs and certificates of coverage and put together a single document that can include the plan document(s).
This is where the term wrap comes from. You eliminate lots of verbiage and paper by wrapping all these plans together. Post these documents electronically if all plan participants have access to them. You need one written copy in your office for those individuals who do not use electronic media.
Realize that few of your under-100 life groups are doing this. Carriers will hem and haw about how this is not necessary. Be a good adviser and tell your groups about this.
Or better yet, call on someone else's groups and ask if they are getting this advice from their current broker. Can you spell opportunity? ERISA disclosure requirements apply to insured plans under 100 plan participants. Period.
Davidson, CEBS, is founder of Davidson Marketing Group and Future Office Network. He is also on the faculty at the Sheldon B. Lubar School of Business at the University of Wisconsin, Milwaukee. Reach him at
