The Catholic University of America

Summary of Federal Laws

Employment

Miscellaneous Employment Laws

Compliance Partners

Manager of Benefits and Compensation
Treasurer

Employee Retirement and Income Security Act (ERISA)

29 U.S.C. § 1001 et seq.; 29 C.F.R. Part 2510 (contains definitions of employee welfare benefit plan, employee pension benefit plan, etc.), 29 CFR Part 2520 (rules for reporting and disclosure), 29 C.F.R. § 2530 (minimium standards) et seq., and 29 C.F.R. § Part 2550 (Fiduciary Responsibility)

Federal tax law on ERISA is codified at I.R.C. §§ 401(a), 403(b), 410(b) and 457. Federal labor law on ERISA is codified at 29 U.S.C. § 1001 et seq. Reporting and disclosure requirements and responsibilities are set forth in 29 C.F.R. Parts 2509, 2510, 2520, 2530 and 2550. Interpretive bulletins explaining the Act are contained at 29 C.F.R. § 2509.75-2 et seq. 

ERISA establishes standards of conduct, responsibility and obligations for fiduciaries of employee benefit plans. This includes various health benefits, disability benefits, unemployment compensation benefits, retirement plans and income deferral programs. The law also limits the remedies available to workers. A person in an employer-sponsored health care plan may recover the benefits and obtain an injunction clarifying the right to future benefits, but the law does not allow compensation for lost wages, death or disability, pain and suffering, or emotional distress. 

ERISA preempts state law relating to pension or welfare benefit plans. Government benefit plans, in contrast, are regulated by state law. 

For an overview of ERISA in general, see Introduction to Employee Benefits Law, by Michael Melbinger, posted online by Winston and Strawn (under Resource Library, Articles, Employee Benefits). 

Reporting and Disclosure Requirements:

Administrators of Employee Benefit Plans must do the following:

  • Furnish participants and beneficiaries with a summary plan description (SPD) which explains in clear language terms, rights, benefits, and responsibilities. The Plan administrator must automatically furnish to each participant of an employee welfare or pension benefit plan and to each beneficiary receiving benefits under a pension plan a copy of the summary plan description, and all modifications and changes referred to 29 USC 1022(a) within 90 days after he/she becomes a participant, or in the case of a beneficiary, within 90 days after he/she first receives benefits, or if later, within 120 days after the plan becomes subject to ERISA [29 USC 1024(b)]. A participant does not become a covered participant until enrolled, but many plans simply give SPDs to all eligible employees, whether or not enrolled, for ease of administration.
     
  • Upon written request, furnish SPDs and other documents as requested to any participant or beneficiary receiving benefits under a pension plan within 30 days. A reasonable charge for copying can be made in this instance.
     
  • Once every five years furnish to each beneficiary receiving benefits under a pension plan, and each participant in an employee benefit plan, an updated SPD that incorporates all plan amendments made within last five years, unless no such amendments have been made, in which case the SPD shall be given out every tenth year of the plan.
     
  • Furnish participants (and beneficiaries receiving benefits under a pension plan) a summary of any material changes to the plan or changes to the information contained in the SPD (within 60 days of the modification or change if it is a material reduction in covered services or benefits of a group health plan, otherwise within 210 days after the end of the plan year in which the change is adopted.)
  • Within 210 days after the close of the fiscal year of the plan, the administrators shall furnish to each participant, and to each beneficiary receiving benefits under a pension plan, a copy of the statements and schedules, for such fiscal year, described in subparagraphs (A) and (B) of section 1023(b)(3) and such other material (including the percentage determined under section 1023(d)(11) of this title) as is necessary to fairly summarize the latest annual report.

  • The administrator of an employee benefit plan must file a form 5500 within 210 days after the close of the plan year. Thus, if the plan year is the same as the calendar year, and ends Dec. 31, then the filing deadline is July 31 of the next year. An extension of the filing deadline of up to two-and-a-half months can be obtained by using form 5558. If the plan year and tax year are the same, and you obtain an extension for filing the institution's tax return, then the deadline for the 5500 is automatically extended as well. For those plans that end on Dec. 31, the filing date is July 31.

See also Reporting and Disclosure by W. Fulton Broemer, Broemer and Associates, LLC. This is an excellent summary of Form 5500, the Summary Annual Report, Summary Plan Description, and other topics.

Summary Plan Description (SPD) Requirements

This is not an exhaustive list of what must be in the SPD. For a complete list of SPD requirements (starting with the name of the plan; the name and address of the employer; the name, business address and telephone number of the plan administrator; etc.), see 29 C.F.R. § 2520.102-3. The regulations also identify what must be in the SPD for welfare benefit plans (which includes group health plans) and for pension benefit plans. The first page of text in an SPD must clearly identify the class of participants and beneficiaries for which the SPD was prepared and the plan's coverage of other classes.

Group Health Plan SPDs must contain the following information:

  • What the participant or beneficiary must pay, in terms of premiums, deductibles, coinsurance, and co-payment amounts.
  • Any annual or lifetime caps or other limits.
  • Preventive services covered by the plan, such as membership in a health club.
  • Description of what drugs are covered under the plan, and exclusions.
  • Any limitations on coverage for medical tests, devices and procedures.
  • Description of how the network services works, and what coverage exists for out of network.
  • Conditions and requirements for primary care and specialty physicians.
  • Emergency medical care authorization requirements.
  • Utilization review or pre-authorization requirements.
  • Description of any plan provisions regarding the disposition of plan assets upon termination.
  • Required COBRA information (if done correctly, this can also satisfy COBRA requirements at the same time).
  • Information regarding maternity stays under the Newborns' and Mothers' Health Protection Act of 1996, and any state law requirements.
  • A description of any fees or charges that may be imposed on a participant or beneficiary.
  • A statement of ERISA rights (a model statement is provided in the new regulations).

In the case of plans with provider networks, the listing of providers may be furnished as a separate document that accompanies the plan's SPD, provided that the SPD contains a general description of the provider network and provided that the SPD contains a statement that the provider lists are furnished automatically, without charge, as a separate document. In the preamble to the regulation the Department notes the following: 

It is important to note, however, that the Department did not intend … to be construed as requiring the SPD to list each and every drug, test, device, or procedure covered by a group health plan. Rather … intended to ensure that SPDs adequately inform participants and beneficiaries whether and under what circumstances the benefits … will or will not be covered by the plan, and to direct participants and beneficiaries as to where additional information may be obtained, free-of-charge, about plan coverage of a specific benefit, i.e., a particular drug, treatment, test, etc. 

Pension and Welfare Plan SPDs must contain, in part, the following:

  • The type of plan, e.g., 401(k), 404 (c), defined contribution, etc.
  • A description and explanation of the plan provisions for determining years of service for eligibility to participate, vesting, breaks in service, and years of participation for benefit accrual.
  • Circumstances that will result in a loss of benefits.
  • Plan authority to terminate the plan, or amend or eliminate benefits.
  • Benefits, rights and obligations of participants and beneficiaries upon termination of the plan, elimination of benefits, or provisions relating to vesting.
  • Allocation and distribution of assets upon termination of the plan.
  • A statement as to whether benefits of the plan are insured under Title IV of ERISA, and if insured, a description of the pension benefit guaranty provisions of Title IV and a statement indicating that further information can be obtained from the plan administrator or the Pension Benefit Guaranty Corporation.
  • A description of any fees or charges that may be imposed on a participant or beneficiary.
  • The regulation contains model language that can be used to satisfy required notification of ERISA rights, including language on COBRA continuation coverage and HIPAA provisions. See 65 Fed. Reg. at 70,243.

 Again, this not a complete list of what must be included in the SPD. For a complete list of SPD requirements, see 29 C.F.R. § 2520.102-3.

Recordkeeping Requirements:

In general, plan administrators are required to keep necessary information and data under Section 107 of ERISA for a period of six (6) years after the filing date of the documents. Section 209 requires employers to keep records of the benefits to which a participant is entitled.

ERISA for higher education attorneys who are not ERISA specialists

Here are some things you might not know about ERISA if you were not practicing in this area as a specialist.

Section 117 and section 127 tuition assistance plans will generally not be ERISA covered plans if the following statutory defintion is met. 29 CFR §2510.3-1 provides, in pertinent part:. . . .

(k) Unfunded scholarship programs. For purposes of title I of [ERISA] and this chapter, the terms "employee welfare benefit plan" and "welfare plan"shall not include a scholarship program, including a tuition and education expense refund program, under which payments are made solely from the general assets of an employer or employee organization.

29 CFR 2520.104b-10 requires the Plan Adminstrator to send the annual reports for welfare benefit plans (as opposed to pension benefit plans) to all participants. Since the ERISA code defines participant to include those eligible to participate, you need to send the Summary Annual Reports for the welfare benefit plans to those who are participants and to those eligible to participate. However, you do not have to welfare benefit plan Summary Annual Reports to beneficiaries, which differs from the pension plan SAR rule.

§ 2520.104b-10 Summary Annual Report.

Obligation to furnish. Except as otherwise provided in paragraph (g) of this section, the administrator of any employee benefit plan shall furnish annually to each participant of such plan and to each beneficiary receiving benefits under such plan (other than beneficiaries under a welfare plan) a summary annual report conforming to the requirements of this section. Such furnishing of the summary annual report shall take place in accordance with the requirements of §2520.104b-1 of this part.

Selected Case Law

 

Advocate Health Care Network v. Stapleton, Case No. 16-74, (U.S. Supreme Ct. June 5, 2017) 

In a unanimous 8-0 decision, the Supreme Court of the United States declared that church and church-affiliated nonprofits’ pension plans are not subject to ERISA’s strict funding and disclosure requirements. The Employee Retirement Income Security Act (“ERISA”), enacted in 1974, protects employee retirement benefits by requiring employers to ensure their pension plans are sufficiently funded. ERISA sought to remedy the trend of employees paying into their pensions during employment, only to learn upon retirement that the pension fund was empty.

Strictly exempt from ERISA’s pension requirements is the “church-plan,” defined as “[a] plan established and maintained for its employees . . . by a church . . . [which] includes a plan maintained by an organization . . . the principal purpose . . . of which is the administration or funding of [such] plan . . . for the employees of a church . . . if such organization is controlled by or associated with a church” (referred to as “principal-purpose organizations”). Since 1980, religiously affiliated organizations such as schools, hospitals, orphanages, and other nonprofits have been operating under this “church-plan” exemption without issue.

Current and former employees of three religiously affiliated hospitals operating under this exemption sued their employers, contending they should not qualify for the “church-plan” exemption to ERISA because their pension plans were not “established” by a church. These employees argued that the text of the ERISA statute itself exempts only those pension plans both created and managed by churches, thereby excluding most hospitals, schools, and other church-affiliates. The district and appellate courts in all three cases agreed with this statutory interpretation, deciding that the hospitals had been improperly skirting ERISA regulations for over 30 years, and now owed significant sums to their pensioned employees – estimated to be an aggregate $4 billion.

On March 27, 2017, the hospitals argued to the Supreme Court on appeal that, the ERISA exemption extends to their pension plans, as the statutory language does not require that the “principal-purpose organizations” have been “established” by a church. Justice Kagan, writing for a unanimous Court, reversed the lower courts, and stressed there is no “establishment” requirement. This decision, in effect, allows church-affiliated organizations to continue administering their pensions independently of ERISA funding and disclosure requirements.    

 

See Supreme Court Backs Church Hospitals, Schools in Case on Pension Rules for commentary on this decision’s effect on Catholic schools.

 

Resources 


DOL FAQ

Reporting and Disclosure Guide for Employee Benefit Plans issued by the U.S. Department of Labor revised September 2014

 Q and A

Q. Where does the 1,000 hour rule come from?

A. The 1,000 hour rule applies specifically to pension plans. See 29 CFR § 2530.200b-1 Computation periods. (a) General. Under sections 202, 203 and 204 of the Act and sections 410 and 411 of the Code, an employee's statutory entitlements with regard to participation, vesting and benefit accrual are generally determined by reference to years of service and years of participation completed by the employee and one-year breaks in service incurred by the employee. The units used for determining an employee's credit towards statutory participation, vesting and benefit accrual entitlements are in turn defined in terms of the number of hours of service credited to the employee during a specified period—in general, a twelve-consecutive-month period—referred to herein as a “computation period”. A plan must designate eligibility computation periods pursuant to § 2530.202-2 and vesting computation periods pursuant to § 2530.203-2, and, under certain circumstances, a defined benefit plan must designate accrual computation periods pursuant to § 2530.204-2. An employee who is credited with 1000 hours of service during an eligibility computation period must generally be credited with a year of service for purposes of section 202 of the Act and section 410 of the Code (relating to minimum participation standards). An employee who is credited with 1000 hours of service during a vesting computation period must generally be credited with a year of service for purposes of section 203 of the Act and 411(a) of the Code (relating to minimum vesting standards). An employee who completes 1000 hours of service during an accrual computation period must, under certain circumstances, be credited with at least a partial year of participation for purposes of section 204 of the Act and section 411(b) of the Code (relating to benefit accrual requirements)....

 

updated 9-13-17