ERISA Compliance & Surviving DOL Audit
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ERISA Compliance& Surviving DOL Audit
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TASC National TPA for Employee BenefitsEstablished in 1975Serving Mid-Large Market Fortune 500Private and PublicState, county, and city governmentHeadquarters in Madison, WIOver 700 Employees Nationwide
National Presence700 Employees 60 Offices45 Regional Sales Directors (150 by 2016) 10,000 Broker/Distributors55,700 Clients750,000+ Participants
ERISAEdge Experience Carolyn McNairy- Sales Development Director of Compliance ServicesCarolyn is Sales Development Director of Compliance Services) for Total Administrative Services Corporation (TASC) where she also served as the Product Administrator for ERISAEdge.Her role also includes conducting National Seminars and Webinars to educate the TASC Group Sales Force,Employee Benefit Consultants, General Agents, Insurance Carrier Sales Staff and Providers and clients on ERISA/FMLA/COBRA/FSA legal requirements. She has conducted over 2000 National Seminars and conducts monthly Provider and client Webinars.Carolyn has been in the employee benefit and administration business since 1978. She is the President and founder of C&J Consulting & Administration, Inc., a company specializing in compliance issues and administration of ERISA. She agency was purchased by TASC in February of 2008.Rick Jones-Esq. Staff Attorney Rick Jones was the Vice President of COBRA Services and the Staff Attorney at HFS Benefits for 10 years. HFS was purchased by TASC on July 1, 2011. Rick is currently the Staff Attorney for Total Administrative Services Corporation (TASC). HFS Benefits and TASC provide Section 125 (Cafeteria Plan), HRA, HSA, Transportation and COBRA Administration services to employers nationwide, including discrimination testing and 5500 filings. In his current role, Mr. Jones advises TASC on product compliance, contractual issues with clients, and any compliance issues that arise. Rick has been in Employee Benefits business since 1989.Jeb Hennessey- Vice President Compliance Jeb manages a staff responsible for the generation and delivery of ERISA welfare benefit wrap plan documents/Summary Plan Descriptions, welfare Form 5500 returns (including DFVCP filings), Summary Annual Reports., Cafeteria and welfare benefit plan nondiscrimination testing including the testing of cafeteria plans, Flexible Spending Accounts, Health Reimbursement Arrangements, self-insured medical plans and group term life insurance plans. HFS was purchased by TASC on July 1, 2011. Jeb was with HFS from 2003 to until purchase. Jeb has been in Employee Benefits Administration since 1992.
Whats the origin of ERISA? Location: Studebaker Corporation in South Bend, Indiana.Date: December 23, 1963Event: The company has announced the plant is closing.
Sources:DiFelice v. Aetna U.S. Healthcare, 346 F.3d 442, 454 (3d Cir., 2003) "The Most Glorious Story of Failure in the Business: The Studebaker-Packard Corporation and the Origins of ERISA" by James A. Wooten
Whats the origin of ERISA? what happened next wasnt so pretty
5,000 workers dismissed
Pension plan terminated that covered 11,000 members of United Automobile Workers
Underfunded plan: not enough funds to cover vested benefits
Of the 11,000 workers:4,100 reaching age 60 received a full pension4,000 (59.5 years old, 43 years of service) received 15%2,900 received nothing at allSome with 40+ years of service missed full pension (age 60) by a few months
And, just days before December holidays, 3,000 laid off with no pensionSource: "The Most Glorious Story of Failure in the Business: The Studebaker-Packard Corporation and the Origins of ERISA" by James A. Wooten
ERISA: Employee Retirement Income Security Act
ERISA is governed by the U.S Department of Labor and enforced by the Employee Benefits Security Administration (EBSA). The EBSAs primary responsibility is to ensure the integrity and compliance of the private employee benefits plan system in the United States. EBSA Mission StatementThe mission of the Employee Benefits Security Administration is to assure the security of the retirement, health and other workplace related benefits of America's workers and their families. We will accomplish this mission by developing effective regulations; assisting and educating workers, Plan Sponsors, fiduciaries and service providers; and vigorously enforcing the law.http://www.dol.gov/ebsa/ erisa_enforcement.html
Why are so many Employers out of Compliance?Overall Lack of Awareness in MarketplaceCarrier Documents thought to be CompliantConfusion due to a Complexity of the RegulationsPrior Limited Enforcement However, Compliance is Not An OptionIts the Law!Statistics are that 90-95% of Employers have at least one violation of ERISA regulations.
ERISA DefinedEmployee Retirement Income Security Act (ERISA)Federal Law Enacted in 1974Title 1 is part of U.S. labor laws; governs the structure of employee benefits plans.Requires detailed disclosure to covered individuals. (Applies to all Private Sector Employers regardless of size)Requires detailed reporting to the government. )(Plans with 100+ participants)Imposes strict fiduciary code of conduct on those who sponsor and administer ERISA Plans.Imposes federal mechanism for enforcing rights and duties with respect to ERISA Plans and preempts a large body of state laws.
ERISA Defined (contd.)DOL (Department of Labor)Failure to comply with ERISAs requirements can be quite costlyThrough DOL enforcement actionsGovernment Penalties for Non-ComplianceCase Law: 1) $86,500 Failure to File Complete and Accurate Form 5500 Airport Hospitality, LTD, King of Prussia, Penn., 2010 2) $241,000 Failure to Provide SPD to Participant Gorini v. AMP Inc., 117 Fed. Appex, 193 (3d Cir. 2004) 3) $10,780 - Failure to Provide SPD to Participant Kasireddy v. Bank of America Corp. Benefits Committee, 2010 WL 4168512 (N.D. Ill. Oct. 13, 2010) 4) $13,750 - Failure to Provide SPD to Participant Latimer v. Wash. Gas Light Co., 2012 WL 2119254 (E.D. Va. 2012)
ERISA TitlesTitle 1 Applies to H&W benefits7 Parts (5 parts apply to H&W benefits)Part 1: Reporting & DisclosurePart 4: Fiduciary responsibilityPart 5: Administration & EnforcementPart 6: COBRA and additional standards for group health plansPart 7: HIPAA, Newborn & Mothers Health Protection, Mental Health Parity Act, Womens Health and Cancer Rights Act (WHCRA)
What are the elements of an ERISA plan?
Five elements of a plan:plan/fund or programestablished or maintainedby an employer or employee organization or bothfor the purpose of providing welfare or retirement benefitsto participants and beneficiariesSource: ERISA Section 3(1). See also 29 C.F.R. Sections 2510.3-1, 2510.3-1(a)(2))
Welfare Benefit PlanExamples:Health, Dental and/or Vision Insurance or plansHealth Flexible Spending Accounts (FSAs)Health Reimbursement Arrangements (HRAs)Accidental Death & Dismemberment InsuranceGroup Term Life InsuranceShort- and Long-Term Disability Severance InsuranceWellness and Employee Assistance ProgramsVoluntary Benefits offered as pre-tax benefits under any Section
Sources: ERISA Section 3 29 C.F.R. Section 2510.3-1
Voluntary Insurance(1) the employer makes no contributions, (2) participation is completely voluntary, (3) the sole function of the employer is, without endorsing the plan, permitting the insurer to publicize the program and collecting premiums through payroll deductions, and (4) the employer receives no commissions other than reasonable compensation for administrative services.
The DOL regulations state that insurance benefit programs offered by an insurer on a voluntary basis (100% employee paid) will not be deemed established or maintained by an employer, if the following four tests are met:Most voluntary programs can easily satisfy requirements # 1, 2, and 4. It is less clear what employer activities under #3 will cause a plan to fall outside the safe harbor and, thus, be subject to ERISA.
Source: 29 C.F.R. Section 2510.3-1(j)
Voluntary Insurance: Factors that impact the likelihood that an employer is endorsing an ERISA plan Permits employees to receive a group discount on individual policies; Permits employees to receive group rates on group policies; Serves as policyholder; Permits the insu