Employer ERISA Responsibilities under a Group Health Plan

The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that establishes minimum standards for pension plans in private industry. ERISA also covers retirement, health and other welfare benefit plans.

ERISA does not require that an employer establish a benefits plan, only that they follow certain procedures once they do so. Employers are obligated to provide promised benefits and satisfy the ERISA requirements for managing and administering private retirement and welfare plans.

Because employers frequently function as fiduciaries, and therefore must follow ERISA regulations for employers as well as fiduciaries, they often find themselves at a higher risk for potential liability.

Employers implementing a health benefit plan should do the following:

• Contact any providers acting in a fiduciary capacity to clarify the extent of all fiduciary responsibilities. Make sure these responsibilities are clearly spelled out in writing.

• If participants make their own investment decisions, then employers should verify that employees receive the information they need to make informed decisions about how their individual accounts are managed.

• When hiring a third party vendor (also known as a third party administrator, or “TPA”), document the entire research and hiring process. Many plan sponsors hire TPAs to administer claims programs for healthcare benefits.

• Be prepared to monitor the plan’s service providers on a regular basis.

ERISA regulations also prohibit certain transactions between a benefit plan and “parties in interest.” This could include employers or individuals in a position to exercise improper influence over the plan. Failure to meet these requirements risk civil monetary penalties under Title I of ERISA.

“Most importantly, employers should have a clear understanding of fiduciary responsibility, even if they aren’t the plan’s fiduciary, and in-depth knowledge of all benefit plan’s provisions.”
-- Mark Johnson, Ph.D., J.D., ERISA Group Health Plan Expert



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