You can help employers follow ERISA and other regulations
BY TOM AVERY
Employers are responsible for complying with ERISA (and the Department of Labor, COBRA, and the Internal Revenue Service).
So it’s not the broker’s problem, right?
The recent broker compensation disclosure requirement is changing the way brokers think about the services they provide to clients. When employers begin to question what they’re getting out of their broker relationship, “not my problem” isn’t going to cut it.
One of the ways brokers can provide a additional service to clients is by helping them follow regulations related to employee welfare benefits. Wrap document creation ensures all of the employers’ plans are compliant.
Keep reading to learn who’s responsible for what, what a wrap document can do, and why wrap documents are a service all brokers should be providing their clients.
One of the ways brokers can provide an additional service to clients is by helping them follow regulations related to employee welfare benefits. Wrap document creation ensures all of the employers’ plans are compliant.
Just what are employers responsible for?
If an employer provides health and welfare benefits, then they likely have to comply with a host of regulations, namely ERISA. Because nothing is ever easy when dealing with regulations, this can be extra confusing because three government agencies are responsible for enforcing ERISA: the Department of Labor, the Department of the Treasury (especially the Internal Revenue Service), and the Pension Benefit Guaranty Corp.
ERISA requires that every employee welfare benefit plan have a written plan document. This document must clearly identify certain information about the plan, such as:
● Named fiduciary and allocation of responsibilities
● Description of funding
● Plan name, number and year
● Eligibility rules and benefits included/not included
● Procedures for amending the plan
● What happens if the plan is terminated
Additionally, ERISA also requires that every employee welfare benefit plan have a summary plan description. The summary plan description informs participants and beneficiaries about their rights and benefits. This document must include important plan rules and the benefits available, plus key information such as:
● Plan name
● Employer name, address, and Employee Identification Number (EIN)
● Plan administrator and contact information
● The source of plan contributions
● Information about plan trustees
● A claims procedure
● Information about eligibility for plan participation
● A statement of ERISA rights
These lists are not exhaustive. For a full list of ERISA requirements, visit the U.S. Department of Labor [https://www.dol.gov/general/topic/retirement/erisa].
Some employers assume the plan documents their carrier shares fulfill their compliance. They don’t. The Summary of Benefits and Coverage (SBC) that employers receive from their carriers is not sufficient for meeting ERISA disclosure requirements. These plans do not include this key information about the fiduciary, source of contributions, eligibility, responsibilities, etc.
Employers need help filling in the gaps of what they already have to ensure they have a document that meets these standards. Enter the wrap doc.
What is a wrap document?
Finding all of the necessary information for each plan and for each regulation could be a lot of work when handled individually. But not when you have a wrap document.
The wrap document supplements the existing plan documentation with the necessary ERISA compliance information. It literally wraps the entire offering into one package, essentially combining everything into a single plan.
A thorough wrap document includes the necessary plan document and summary plan description information required by ERISA, plus other federal compliance details and necessary benefit explanations. By creating a document that contains all products at once, employers can ensure compliance with all relevant federal regulations.
While a wrap document is a simple solution on paper, it can be time-consuming to build, especially for smaller employers who lack the resources to create the documents and stay in the loop about changing requirements. But with the right help — like from their knowledgeable insurance broker — employers can easily stay in compliance.
Why brokers should help clients with wrap document creation
Yes, all of this compliance and document creation is the responsibility of the employer.
However, as their broker of record, you serve as a trusted advisor. You’ve positioned yourself as the expert when it comes to their health benefit plans.
You know your client should be in compliance. You are uniquely positioned to understand the regulations and protect the client from potential fines. They might even assume that the SBC and other plan documents you send them fulfill ERISA compliance (imagine their surprise when they’re hit with a fine).
And while this has been the law for years, there’s a new urgency to going the extra mile for your clients. The broker compensation disclosure requirement [https://signal-sync.com/broker-compensation-disclosure-requirements-what-you-need-to-know/] is going to encourage clients to take a closer look at what exactly they’re paying you for. By not helping clients with their benefits compliance, you’re putting your book of business at risk — because there is always another broker ready with a solution.
Developing a system for automating wrap document creation makes it easy to go above and beyond for clients and help them remain in compliance — something they’ll reward you for with their continued business.
TOM AVERY is the founder and president of Innovative Broker Services , an independent boutique brokerage company and a Sacramento Business Journal Top-10 Employee Benefits Agency for 12 consecutive years. Avery is also the founder and president of Signal Sync, an insurance industry SaaS and agency automation solution designed for the independent agency. He continually writes regarding the many challenges faced by today’s agencies and has developed Signal Sync to overcome these challenges.