Category Archives: Erisa documents

Why you need an ERISA Wrap Document today.

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ERISA Wrap Documents are so important

If you’re a business owner, you’ve likely heard of ERISA, the Employee Retirement Income Security Act, which passed in 1974. ERISA is probably one of several acronyms you hear about all the time but likely don’t pay too close attention to. When a business provides Employee Benefit plans to its employees — this means medical, dental, vision — they’re doing so under the protection and guidance of the ERISA act.

What that means is the rules of ERISA need to be adhered to. Whether you like it or not, as an employer, you are a fiduciary. One of the rules under ERISA is fiduciaries are required to have a specific document that outlines employees’ rights. It’s called an ERISA wrap document and it takes all of your benefit plans and wraps them into one document.

What’s the big deal?

Many people think it’s not a big deal. Frankly, most employers don’t do it. But what can become a big deal is the fines you can face for not having an ERISA Wrap document. You might be thinking, “the fines aren’t that bad or “oh, it won’t be that much”. We’re here to give you a little wake up call and share what the fines can be.

Fines for not having an ERISA Wrap Document can cost $110/day, per employee until the document is produced under audit. Let that sink in for a moment. If you’re hit with these fines, they’ll add up very quickly.

You might think, “I’ll never get audited so I don’t mind taking the risk”. But in reality, here’s what can happen: An employee is terminated and they feel they were wrongfully treated or wrongfully terminated. So, said employee hires an attorney and they file a lawsuit. One of the first thing the attorney will do is call the EDD. Then EDD will be obligated to call the employer. And the first thing the EDD will ask for is the ERISA plan document, because they know most employers don’t have it.

The Good News

Fortunately, the cost to prepare these document is very reasonable. If you don’t have your ERISA Wrap documents prepared, reach out to us, we’re happy to talk you through it and help you get one. This simple step will greatly limit your exposure.

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Don’t put yourself at risk. ERISA Wrap docs are easy and affordable to set up. We can help you with them today. Email us at marketing@corpstrat.com for more information

CCPA and Its Effect on the Employment Relationship

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CCPA and the Employment Relationship

Since January 1, 2020, the California Consumer Privacy Act of 2018 (CCPA) has officially been in effect. In short, the CCPA imposes new privacy obligations on businesses that collect personal information of California consumers. But it doesn’t just stop at consumers. With the recent Attorney General-issued revisions, the CCPA applies to the employment relationship as well, including information related to employee benefit plans.

Here is a breakdown of how the CCPA affects the employment relationship.

CCPA and Employees

Under the CCPA, the definition of “consumer” is very broad, providing that any natural person who is a California resident is a “consumer”. Therefore, this broad definition extends to cover employees who are resident in California, no matter the fact that their relationship with the business is as an employee, and not a consumer.

Since the definition of “consumer” is very broad, so is the definition of “personal information.” However, the recent revisions by the Attorney General brought some clarity about what “personal information” constitutes: employment-related information is considered “personal information” under the CCPA. There is no exemption for employment-related personal information stored and maintained by an employer.

As such, similar to consumer information, the CCPA requires employees and applicants to be notified that their personal information is being collected.

Other noteworthy revisions from the Attorney General include:

  • An employer is not required to provide a link to an online privacy policy to employees and applicants as a method of notice; they can be notified through a paper form or via email.
  • An employer is allowed to provide a link to an online privacy policy tailored to employee and applicant data, rather than the general online privacy policy which deals with consumers as a whole.

Employment-related Information Under CCPA

The following common types of “employment-related” data are considered “personal information” (and protected) for purposes of the CCPA:

  • New hire/on-boarding paperwork, including resumes, employee applications (including Social Security Number, drivers’ license, mailing address), background checks, IRS Forms W-4 (withholding), etc.
  • Payroll information, including employee bank account numbers for direct deposit.
  • Credit card information provided in connection with expense reports.
  • Random drug testing paperwork and results.
  • Documentation of various types of leave, such as sick leave, vacation, paid time off, etc.
  • Employee benefit plans (to the extent not exempt from the CCPA).
  • Employee’s online activity on a work computer/system, such as browsing history and search history.

Data from Employee Benefit Plans

Data from employee benefits plans are covered—and protected—under the CCPA. Employee benefit plans collect and use personal information since plans require various types of personal information, such as name, address, Social Security Number, and insurance policy information.

However, certain benefit plans may have varying compliance obligations to the CCPA, especially if they are HIPAA-covered or ERISA-covered.

compliance obligations of certain benefit plans may be: (1) limited by the CCPA’s HIPAA exemption; and (2) potentially preempted by ERISA.

HIPAA Exemption

The CCPA does not apply to “protected health information” (PHI) of a group health plan that is subject to HIPAA or to other personal information protected in the same fashion as PHI. Employer-sponsored HIPAA-covered benefit plans typically include a major medical plan, dental, vision, health flexible spending account, and certain wellness or employee assistance programs. One thing to note is that some information collected by a benefit plan may be personal information under the CCPA, but not PHI under HIPAA, and there may be compliance obligations concerning that information.

ERISA Preemption

The CCPA does not specifically address how it applies to benefit plans not covered by HIPAA. For plans that are subject to the Employee Retirement Income Security Act of 1974 (“ERISA”), there is a possibility that the CCPA could be preempted, or prevented, by ERISA. As such, ERISA-covered benefit plans that are not HIPAA-covered (such as 401(k) plans, long term disability, and AD&D) may be able to successfully argue that personal information collected and used is not subject to the requirements of the CCPA.

The Bottom Line

When dealing with the CCPA regarding employment, an employer should apply the same steps they apply to “personal information” from customers and other consumers to employee data and employee benefit plan data (that may be subject to the CCPA).

Reach out to CorpStrat to learn how we design and manage (compliant) employee benefits at competitive rates so your company can attract, reward, and retain your employees.

Get Informed on Rising Health Care Costs

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 Association Based Health Insurance – A Cure For Small Group?

Under the Affordable Care Act (ACA), employers that do not meet the 50 or more full-time or full-time equivalent employee threshold to be Applicable Large Employers (ALEs), are not required to offer health coverage. Nor do they face penalties. Not surprisingly, as a result, smaller businesses often do not offer coverage.

New regulations proposed by the U.S. Department of Labor (DOL) want to change that dynamic. And in a thriving economy, where unemployment means retention is key, health insurance is a key driver in employee acquisition and retention.

Up to 11 million Americans working for small businesses or who are sole proprietors and their families lack employer-sponsored insurance. The DOL hopes new rules on HOW healthcare plans are purchased will close the gap of uninsured Americans; without eliminating options available in the healthcare marketplace.

New Rules

The proposed regulations will allow small business health plans—known as Association Health Plans (AHP)—to expand under The Employee Retirement Income Security Act of 1974 (ERISA). This may allow the self-employed and other small businesses to band together to form their own associations for the purposes of providing healthcare coverage.

AHPs would be required to accept all applicants and could not deny individuals with pre-existing conditions or charge more for people who are sick. However, they could reduce prescription drug coverage and increase coverage in other categories to compensate for the reduction, the effect of which would be to increase costs for chronic care patients.

The employer members of these plans would need to be in the same trade, industry, line of business, profession, or to have their principal place of business in the same state, or, if in multiple states, in the same metropolitan area.

Under the current regulations, an AHP is considered a single plan only if the association has a purpose or function unrelated to offering healthcare benefits and the employer members have a common economic interest. So, few options exist and all have to comply with the ACA’s “essential benefit rules”.

The end result of these new rules, or so the thinking goes, is that this will make premiums more affordable. The trade-off is that these health insurance plans would be less extensive then what is usually required by health insurance plans offered by the current marketplace. Lots of review and legislation await the proposed offering of new association plans. However, they offer a glimmer of home to the problem of rising health insurance costs.

ERISA Compliance – What Every Employer Needs to Know About Plan Documents

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Imagine an agent from the Department of Labor walks in your office and asks for your ERISA documents. For 90% of employers, the answer would be “what is that?”. Yet for every employer, maintaining ERISA documents is essential – and here is why:

ERISA is a federal law that sets minimum standards for employee benefit plans maintained by private-sector employers.

ERISA includes requirements for both retirement plans (for example, 401(k) plans) and welfare benefit plans (for example, group health plans). ERISA has been amended many times over the years, expanding the protections available to welfare benefit plan participants and beneficiaries.

The Department of Labor (DOL), through its Employee Benefits Security Administration (EBSA), enforces most of ERISA’s provisions. Violating ERISA can have serious and costly consequences for employers that sponsor welfare benefit plans, either through DOL enforcement actions and penalty assessments or through participant lawsuits.

All welfare plans are subject to ERISA (medical, dental, vision, life, disability, certain employee assistance and wellness programs, for example) and are required to have a plan document that is memorialized in writing. ERISA further required that the plan document contain specific, express provisions. This means if you deliver any type of benefit program to employees, it’s likely you need a current ERISA document.

How does the DOL enforce ERISA?

The DOL has broad authority to investigate or audit an employee benefit plan’s compliance with the ERISA. The DOL’s EBSA division handles audits of employee benefit plans. To perform these audits, EBSA employs over 400 investigators working out of field offices, many of whom are lawyers or CPAs or have advanced degrees in business or finance. The DOL has authority to assess civil penalties for many different types of ERISA violations.

How can an employer minimize its risk of being audited by the DOL?

As a practical matter, an employer has little control over whether it will be audited by the DOL. However, an employer can take the following steps to help minimize its exposure to a DOL audit:

  • Respond to participants’ benefit questions and requests for information on a timely basis;
  • File Form 5500 on time and make sure it is complete and accurate;
  • Create and distribute participant notices required by law (for example, the summary of benefits and coverage) by the deadline; and
  • Make timely updates to plan documents and summary plan descriptions (SPDs) to reflect legal and design changes.

How can employers be prepared for a DOL audit?

The best way to prepare for a DOL audit is to remain in compliance with the law and establish a recordkeeping system for maintaining all of the important documents relating to your employee benefit plans. Retaining complete and accurate records will help move along the audit process and provide an accurate picture of an employer’s benefit package. As a general rule, these records should be retained for seven years.

Because the DOL has increased the frequency of health plan audits, employers should consider reviewing their health plans for compliance now, before they are selected for audit. It is important for employers to get their health plans’ paperwork in order as part of this process. Don’t be fooled into thinking you are “too small” for ERISA. Employers of every size who provide any type of Employer Sponsored Benefit Plan are subject to ERISA. Ask your broker if you need documents and get them done!

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