ERISA Pros’ Kearse Addresses Health Underwriters

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Bernard Kearse, JD, LLM, founder of ERISA Pros LLC, addressed the Atlanta Association of Health Underwriters (AAHU) at its Annual Benefits Forum on February 18, 2010. His topic, "ERISA - Are Your Companies Compliant?" was timely in light of the current environment of increased Department of Labor (DOL) enforcement activities. Over 200 group health insurance agents, brokers, and employee benefit consultants from Atlanta and surrounding areas attended the Forum.

ERISA (the Employee Retirement Income Security Act of 1974) is a Federal law which deals with employee benefit plans, both Qualified Retirement Plans (e.g., pension and profit sharing plans) and Health & Welfare Benefit Plans (e.g., group insurance and other fringe benefit plans). The goals of ERISA are to provide uniformity and protections to employees. ERISA compliance is enforced primarily by the DOL, which imposes certain reporting (to the DOL) and disclosure (to Plan Participants) requirements on employers. Failure to comply with ERISA can result in enforcement actions, penalties, and/or employee lawsuits.

ERISA enforcement produced $1.2 billion in 2008 for the U.S. government stemming from 175,000 individual complaints, 3,570 civil investigations, 205 cases referred for litigation, and 101 criminal indictments. In 2009, the DOL announced plans to hire 1,000 new employees, 670 of whom would be investigators. Looking ahead to 2010, employers that are required to file an annual Form 5500 must file it electronically.

Electronic filing of Form 5500 may make it easier and faster for some employers to file, but for others, it will create confusion and complication. It will also make it easier for the DOL to monitor compliance and enforce penalties. Rather than relying on random audits or participant complaints to initiate an investigation of an employer's compliance with ERISA, the DOL will be instantly alerted if numbers on a Form 5500 are inconsistent or if the form is incomplete or not prepared and filed at all. The DOL will also be able to perform additional checks on the Form 5500, such as the reasonableness and accuracy of information provided.

The penalties for missing a Form 5500 deadline are onerous – up to $1,100/day for each ERISA plan. These penalties are cumulative and have no statute of limitations. According to Kearse, “An employer with 100 employees that does not file a Form 5500, or files it late, risks $1,100 per day to save less than 2¢ per day per employee. We were extremely surprised when our study indicated that as many as 55% of employers may be out of compliance for not filing Form 5500s for their Welfare Benefit Plans. Fortunately, the government has a voluntary compliance program for delinquent filing that can mitigate these significant penalties—if the employer voluntarily addresses this problem before the DOL discovers its failure.”

A low rate of compliance may be due in large part to a misunderstanding about who is responsible for preparing and filing Form 5500s. Most employers believe that their insurance broker, insurance carrier, accountant, or other advisor is taking care of this. However, ERISA compliance is solely the employer's responsibility. Yet, if an employer encounters DOL fines or employee lawsuits arising from noncompliance, Kearse observes that since the plans are often insured, the employer often faults its broker for not alerting it to this potential problem. Brokers who partner with ERISA Pros and offer its SPD and Form 5500 preparation services will be projecting a professional, proactive, and out-of-the box interest in their clients, while protecting their client relationships from misunderstandings such as these.

At the Annual Benefits Forum, Kearse also discussed related topics such as: which employers are subject to ERISA, which benefits are ERISA Plans, what is a Plan Document, what information should a Summary Plan Description (SPD) contain, how must the SPD be delivered, who is required to file Form 5500, and why should an employer comply with ERISA. Of particular interest was ERISA Pros’ proprietary Wrap-Tightsm compliance and document system. This allows employers to prepare and adopt a single Plan Document and deliver one SPD, rather than having to prepare them for each separate component benefit plan. Utilizing this approach, an employer only needs to file one Form 5500, avoiding the often significant costs of preparing separate Form 5500s for each plan.

About ERISA Pros:
ERISA Pros provides ERISA compliance solutions for Health & Welfare Benefit Plans, including Plan Documents, wrap SPDs, and Form 5500 electronic filing services. Atlanta attorney, Bernard Kearse, JD, LLM, founded ERISA Pros to fill the need for high quality, yet affordable documents and services. For a complimentary ERISA compliance evaluation or for additional information on ERISA Pros, contact Bernard Kearse.

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Bernard V. Kearse
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