For business owners, navigating the Employee Retirement Income Security Act (ERISA) can feel daunting. The regulations are complex, and even unintentional errors can lead to costly fines and penalties. One tool that can simplify compliance and help protect your business is an ERISA Wrap document. Let’s explore some of the most common mistakes you might make with ERISA compliance and how a Wrap document can provide a terrific solution.
1. Failing to Provide a Summary Plan Description (SPD)
Under ERISA, employers are required to provide employees with a Summary Plan Description (SPD) for each health and welfare benefit plan. However, many business owners mistakenly believe that insurance carriers’ certificates of coverage or benefit booklets fulfill this requirement. These documents typically don’t meet ERISA’s standards, leaving employers vulnerable to noncompliance.
A Wrap document bridges this gap by combining the insurer’s materials with an employer-specific SPD, creating a complete and compliant document that meets ERISA’s requirements.
2. Overlooking Annual Reporting Requirements
Businesses with more than 100 participants in a health or welfare plan are required to file Form 5500 annually. Many business owners either forget this obligation or incorrectly assume their insurance carriers will handle the filing. This oversight can result in hefty fines from the Department of Labor (DOL).
A Wrap document can help streamline the reporting process by consolidating all benefit plan information into one comprehensive document, making it easier to compile and submit the required data.
3. Failing to Address Plan Updates
ERISA regulations require SPDs to be updated whenever there are significant plan changes. Many employers neglect this step, especially if they’re managing multiple benefit plans with varying updates.
A Wrap document simplifies this process by serving as a centralized document that can be updated as needed, ensuring all plan information remains current and compliant.
4. Ignoring Penalty Risks
ERISA penalties are steep—up to $1,100 per day for failing to provide an SPD or $250 per day for late Form 5500 filings. These costs can add up quickly, even for small errors.
By implementing a Wrap document, employers can ensure they meet key ERISA requirements, reducing the risk of penalties and safeguarding their business.
Protect Your Business with an ERISA Wrap Document
ERISA compliance doesn’t have to be overwhelming. By using a Wrap document, you can streamline your compliance efforts, minimize risks, and focus on what matters most—running your business. If you’re unsure whether your plans are compliant, reach out to our experienced insurance brokers at Bay Area Health Insurance to learn how a Wrap document can help protect your business.
