Frequently Asked Questions - Employee Retirement Income Security Act of 1974 (ERISA)

The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for most voluntarily established health and welfare plans in private industry to provide protection for individuals in these plans.

ERISA requires plans to provide participants with plan information including important information about plan features and funding; provides fiduciary responsibilities for those who manage and control plan assets; requires plans to establish a grievance and appeals process for participants to get benefits from their plans; and, gives participants the right to sue for benefits and breaches of fiduciary duty.

The Department of Labor's Employee Benefits Security Administration (EBSA) is responsible for administering and enforcing these provisions of ERISA. Click on the agency to find out more about the agency's program. As part of carrying out its responsibilities, the agency provides consumer information on health and welfare plans as well as compliance assistance for employers, plan service providers, and others to help them comply with ERISA

Because, as a "bona fide" trust, its administrators are subject to approval and audit, at least annually, by the Department of Labor.  

There is no clear answer to this question. In common practice, Direct-to-Carrier benefits are accepted by both Federal and State entities in spite of the fact that there is no “bona fide” entity providing benefits. It is best to consult qualified legal counsel if you are uncertain whether your plan is “bona fide” for prevailing wage benefits.

An ERISA Trust is a legal entity that is created to administer health and welfare benefits on behalf of a Trust’s member companies. As a result, when a prevailing wage contractor joins an ERISA Trust, the Trust takes-on all responsibilities and costs for maintaining the benefits of that contractor’s employees. The Trust’s responsibilities also include maintaining compliance with Department of Labor regulations

ERISA Trusts are a solution many prevailing wage contractors use to simplify compliance with provisions of the Davis-Bacon Act and Service Contract Act, requiring employers to provide ‘bona fide’ health and welfare benefits to public works employees, and ERISA’s health, welfare and pension mandates. Because some employers find compliance costs to be onerous and costly, they join Trusts which take-over responsibility for providing benefits on the employer’s behalf.

The Employee Retirement Income Security Act (ERISA) protects a plan's assets by requiring that any persons or entities who have discretionary authority or responsibility, or provide investment advice or guidance, are subject to fiduciary responsibilities. Plan fiduciaries include, for example, plan trustees, plan administrators, and members of a plan's investment committee.

In the case of an ERISA Trust, Fiduciaries are obligated to run the plan solely in the interest of participants and beneficiaries and for the exclusive purpose of providing benefits and paying plan expenses. In addition, they must follow the terms of plan documents to the extent that the plan terms are consistent with ERISA.

Trust Fiduciaries must also act prudently and must diversify the plan's investments in order to minimize the risk of large losses. They also must prevent conflicts of interest, avoiding transactions on behalf of the plan that benefit parties related to the plan, such as other fiduciaries, services providers, or the plan sponsor.

The ERISA Trust will require a Trustee to be identified in the plan. If an individual or officer of your company is named anywhere in the Trust documents, then you retain fiduciary responsibility.

As a Trustee, you retain certain legal rights and obligations to the Trust. The Advantage of these responsibilities is that they can enable the company, as the Trustee, to have greater direct control over plan assets. The disadvantage is that greater control over Trust assets comes with legal responsibility, and potential liability, in the event of a claim against the Trust.

Any Employee participating in a Health & Welfare plan is granted several important rights by the Employee Retirement Income Security Act (ERISA). The Administrators of the ERISA Trust take responsibility for fulfilling these obligations on behalf of the Trust’s employer-members. These responsibilities include: disclosure of important plan information, a timely and fair process for benefit claims, elect to temporarily continue group health coverage after losing coverage, a certificate evidencing health coverage under a plan, and recover benefits due under the plan.

The Employee Retirement Income Security Act (ERISA) requires employers to give plan participants (employees) a summary of their plan, called the summary plan description or SPD. Provided for plan participants by the ERISA Trust Administrators, the SPD details for participants what the plan provides as well as how it operates. Additionally, the SPD provides additional critical information, including: when an employee can begin participating in the plan; how service and benefits are calculated; when benefits become vested and are paid; and, how to file a claim for benefits. In the event that a plan is changed, participants must be informed of those changes by the ERISA Trust Administrators.

The plan administrator is required by the Employee Retirement Income Security Act (ERISA) to provide participants with a copy of the plan's, ‘summary annual report’. Upon behalf of its member companies, the ERISA Trust prepares a summary of the annual financial report, the Form 5500, that most plans are required to file with the Department of Labor.  

If you choose to provide your own benefits to employees, the Employee Benefits Security Administration (EBSA) provides many forms of compliance assistance, including: voluntary compliance programs; advisory opinions; and, relevant publications.

You might also reference EBSA's Compliance Assistance Web page for a compilation which includes information specifically developed to assist and inform employers and employee benefit plan practitioners in understanding and complying with the requirements of the Employee Retirement Income Security Act (ERISA).

Employers and plan practitioners may also benefit by reviewing some of the more general materials available to the public at EBSA's Consumer Information on Health Plans Web page.

If you are participating in an ERISA Trust, then the Trust takes responsibility for maintaining compliance on your company’s behalf.

The Consolidated Omnibus Budget Reconciliation Act (COBRA) is, in fact, an amendment to ERISA. COBRA gives workers and their families who lose their health benefits the right to choose to continue group health benefits provided by their group health plan for limited periods of time under certain circumstances. 

For companies participating in an ERISA Trust, the Trust Administrators maintain compliance by insuring that employee health benefits continue under COBRA in situations such as voluntary or involuntary job loss, reduction in the hours worked, transition between jobs, death, divorce, and other life events.  

It all depends. If you are an over-20 company, then Federal rules currently govern your obligations. However, if you are an under-20 company, there may be separate rules which govern your responsibilities depending upon what State you are based in. For example, an under-20 company based in California is currently subject to CalCobra. When in doubt, we urge you consult qualified legal counsel to determine what COBRA responsibilities your company has.

The Health Insurance Portability and Accountability Act (HIPAA) provides rights and protections for participants and beneficiaries participating in group health plans.

Included within HIPAA are protections which: limit exclusions for preexisting conditions; prohibit discrimination against employees and dependents; and, allow special opportunities for enrollment. HIPAA may also give employees a right to purchase individual coverage in the event that they have exhausted their COBRA eligibility and have no access to a group health plan.

One of the most important protections under HIPAA is that it helps those with preexisting conditions get health coverage. In the past, some health plans limited, or even denied, coverage if a new employee had such a condition before enrolling in the plan. Under HIPAA, that is not allowed. 

As the administrator for trust member’s health benefits, the ERISA Trust will insure compliance with both Federal and State laws.