As an ever-changing healthcare market continues to drive up demand for voluntary benefits, employers face a strategic compliance choice on which brokers and advisers can help them decide.
In a nutshell, they need to determine whether to sponsor those plans and be subject to ERISA or seek an exemption, according to Roberta Watson, an ERISA attorney with the Wagner Law Group. If they choose the latter, she says “they should get careful advice regarding the conditions of the exemption and stay within the exemption.†Where many employers can run afoul of the ERISA exemption is when voluntary benefits are offered to ease the sting of health plan cutbacks or tied to core coverage gaps, Watson explains. The Department of Labor will view those scenarios, which have become increasingly common since passage of the Affordable Care Act, as plan sponsorship and therefore subject to ERISA. Some voluntary benefits aren’t governed by ERISA because they’re not deemed part of an employee pension, health or welfare plan, Watson says. They include legal assistance, dependent care plans and pet insurance. All other voluntary plans must comply with ERISA unless they qualify for an exemption. A recent analysis from ComplianceBug LLC found that more than 80% of voluntary benefit offerings in an industry whose annual sales exceed $7 billion are subject to ERISA. But observers say many employers and their advisers falsely assume the products aren’t governed by ERISA’s reporting requirements. While employers can allow carriers to enroll plan participants at work, they’re not supposed to endorse any service providers or promote the benefits as employer-sponsored to comply with the exemption. Another condition for exemption is that they make available two or more providers. In terms of enforcement, Watson says the DOL hasn’t made the policing of voluntary benefits a priority because complaints haven’t been made. But to ignore the link between ERISA and these employee-pay-all plans would be too risky for employers who don’t qualify for the exemption.
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