Employers Get Your ERISA House in Order

ERISA, the Employer Retirement Income Security Act, was enacted into law in 1974. While the focus of ERISA was retirement plans, the law also imposed requirements on health and welfare plans, including employer-sponsored group health plans.

An overview of ERISA’s provisions and requirements is available through the US Department of Labor’s Employment Law Guide. This information can be found here.

ERISA establishes reporting and disclosure obligations for most employer health plans. Plans are required to describe the rights, benefits and responsibilities of participants and beneficiaries in ERISA covered plans. The more common disclosure documents for health plans are Plan Documents and Summary Plan Descriptions (SPDs).

Many employers, especially smaller employers have been remiss in meeting all of these reporting and disclosure requirements. These lapses may become more apparent with the implementation of the ACA and the attention the ACA has brought to regulatory agencies and employees, among others.

Employers with insured plans, especially smaller employers, may have been lax in meeting the requirements to have a plan document and a summary plan description (SPD) for their plans. These employers have mistakenly assumed that their plan booklets or insurance contracts met the requirements for plan documents or SPDs.

For many employers, these lapses may have been rationalized as harmless ones. The rationale being that an employee is receiving sufficient information about a plan or that the employer was too small to be the target of a Department of Labor (DOL) audit. But, the reality is that failure to provide an SPD or plan document within 30 days of receiving a request from a plan participant carries a penalty of up to $110 per day per participant.

So, then, what is the likelihood that an employer will receive such a request?  As labor law attorneys will say, getting a specific request for any of these documents may mean a lawsuit is brewing. Now, the stakes may be even higher due to a new ploy.

Beware this new ploy!

The ploy involves canny medical providers who resort to what some have described as almost an ERISA-blackmail scheme. After providing services such as sleep studies or vein treatments, these providers bill an excessive fee. After the plan pays the allowable charge, a law firm representing the medical provider contacts the employer demanding the plan documents as a prelude to appealing the carrier’s reimbursement.

Generally speaking, the plan documents are available to plan participants. The patient in this scenario has signed a document that allows the medical clinic to act on the patient’s behalf in requesting the plan documents. Often, the patient has no idea that they’ve signed a release for this information.

The danger for the employer in this scheme is that the requirement to provide the plan documents in 30 days starts when the demand is sent to the employer. Thirty days are not a long time for an employer to:

  1. Recognize the demand
  2. Get the demand to the right person who can act on it
  3. Draft the plan documents and respond to the demand.

In some cases, after the initial demand, the clinic’s legal representatives cease further communication. As such, the employer may consider the issue resolved and not respond.

The surprise comes months or a year later when the clinic’s legal representatives re-initiate contact advising that the 30 days to provide the requested documents has elapsed and that the DOL penalty of $110 per day would now total some great amount. The clinic asserts that they will not contact the DOL regarding the employer’s failure to provide the requested documents, thereby triggering the penalty if the employer pays the full fee originally billed to the plan.

Understanding and complying with the rules of ERISA is not as complicated as one might think. And, for many employers, once the documents have been executed for the first time, keeping them up to date requires minimal effort. Properly executed documents can also prove beneficial for the employer by establishing the ground rules for the plan, in addition to the informational benefit to the plan participants.