Employee Retirement Income Security Act of 1974
From TASC Online[1]:
The Employee Retirement Income Security Act (ERISA) of 1974 establishes minimum standards for retirement, health, and other welfare benefit plans, including life insurance, disability insurance, and apprenticeship plans. ERISA’s extensive rules address the federal income tax effects of transactions associated with employee benefit plans, with mandates that qualified plans must follow to ensure that plan fiduciaries do not misuse plan assets. ERISA has been amended repeatedly since being signed into law.
Also called the Pension Reform Act, ERISA protects the retirement assets of Americans. It is administered by the Employee Benefits Security Administration (EBSA), a division of the U.S. Department of Labor (DOL), along with the Department of Treasury and the Pension Benefit Guaranty Corporation.
Who Must Abide?
The protective laws under ERISA apply to employer-sponsored health insurance coverage and other benefit plans offered to employees by private employers (only). Corporations, partnerships, sole proprietorships, and non-profit organizations are covered, but governmental employers and churches are not, and are exempt from the application of ERISA. ERISA does not require employers to offer plans; instead it sets the rules for the plans and benefits which employers choose to offer. ERISA laws apply to privately purchased, individual insurance policies or benefits only if (a) the employer allows those individual policies to be pre-taxed under a 125 plan, or (b) the employer endorses the policies as “voluntary policies” marketed and sold at the workplace.
What Does ERISA Regulate?
ERISA is sometimes used to refer to the full body of laws regulating employee benefit plans, which are found mainly in the Internal Revenue Code and ERISA itself. ERISA does not require that employers provide a benefits plan, but it regulates the operations of such health benefit plans. In sum, while offering such plans is optional, once offered they must be managed in compliance with the various provisions mandated under ERISA, which include the following:
Conduct: ERISA rules regulate the conduct for managed care (i.e., HMOs) and other fiduciaries (the person financially responsible for the plan’s administration).
Reporting and Accountability: ERISA requires detailed accountability and reporting to the federal government.
Disclosures: Certain disclosures must be provided to plan participants (i.e. a written Plan Summary that clearly lists the benefits being offered, the rules for getting those benefits, the plan’s limitations, and other guidelines for obtaining benefits such as obtaining referrals in advance for surgery or doctor visits).
Procedural Safeguards: A written policy must be established to address how claims should be filed, and must detail a written appeal process for claims that are denied. ERISA also requires that claims appeals be conducted in a fair and timely manner.
Financial and Best-Interest Protection: ERISA acts as a safeguard to assure that plan funds are protected and delivered in the best interest of plan members. ERISA also prohibits discriminatory practice when granting plan benefits to qualified individuals.
ERISA has been amended to include two additional areas that specifically address health insurance coverage: the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) and the Health Insurance Portability and Accountability Act of 1996 (HIPAA).
Resources
Senate.gov: Health Plans & Benefits: ERISA
DOL.gov: Fact Sheet: What Is ERISA
DOL.gov: Compliance Assistance