Employers must follow many steps regarding employee benefits to comply with federal laws and regulations. Two federal regulations are: Employee Retirement Income Security Act (ERISA) and Affordable Care Act (ACA).
ERISA applies to employee welfare benefit programs for employers of all sizes. It includes group health plans but excludes church and government plans.
The ACA was enacted in 2010 to make health insurance more accessible and affordable. For employers, there are several ACA requirements to be aware of.
Please keep reading for our glossary of ERISA and ACA-related terms and how they apply to your business.
ERISA
This term stands for the Employee Retirement Income Security Act and applies to employee welfare benefit plans. ERISA includes group health plans unless specifically exempted.
Summary Plan Description (SPD)
An SPD is a required disclosure the plan administrator must provide within 90 days of the participant beginning coverage. This document details the plan’s benefits and should help the participant understand them. It also outlines how an employee can participate in the plan and how they may file a claim to secure benefits.
- Wrap Documents: Typically, the benefit booklet from an insurance carrier needs to satisfy SPD requirements on its own. Administrators may use a wrap document in cooperation with the benefits booklet to fill in other ERISA-required information.
Summary of Material Modifications (SMM)
This document informs participants about changes to their employee benefit plan. An SMM must be distributed at different times depending on the shift.
- If the plan is changed without a reduction, the plan administrator has 210 days after the plan year-end in which the change takes place to provide this document.
- If the change reduces benefits, the SMM must be issued within 60 days from adoption.
- If an employee requests an SMM, the plan administrator must provide it within 30 days.
Form 5500
This form shows the IRS and DOL that employee benefit plans follow ERISA requirements. It must be filed by the last day of the seventh month following the plan year’s end (for calendar-year plans, this date would be July 31 of the following year).
Summary Annual Report (SAR)
The plan administrator must provide this document to participants within nine months of the plan year’s end. It is a narrative summary of Form 5500 and informs participants that they may receive a copy of their plan’s annual report.
Plan Documents
The plan administrator must provide participants with documents and information about their plan within 30 days of a written request.
ACA
This term stands for the Affordable Care Act, enacted to help reform the health insurance market.
Statement of Grandfathered Status
Grandfathered plans are exempt from some ACA mandates. The plan administrator must periodically issue this statement for plans with grandfathered status only. They must provide the participant with materials describing plan benefits, such as the summary plan description (SPD) and open enrollment materials.
Notice of Rescission
If the plan provider is going to discontinue an employee’s benefits, the plan administrator must provide a Notice of Rescission 30 days before it occurs.
Notice of Patient Protections and Selection of Providers
When a participant receives the SPD or a similar description of benefits, they must also receive this notice. This notice informs the participant of their rights under the plan, for example, their right to choose a primary care physician, emergency service benefits, and more. Previously, this requirement did not apply to grandfathered plans. But, for plan years beginning on or after Jan. 1, 2022, the Consolidated Appropriations Act removed the grandfathered plan exception to expand patient protections and benefits for emergency services to prevent surprise medical bills.
Uniform Summary of Benefits and Coverage (SBC)
The SBC must be provided by the plan administrator at specific times, such as upon coverage application and renewal. Plan administrators and issuers must also give a notice 60 days before changes to the summary that occur mid-plan year.
Exchange Notice
Employers must provide all new hires with a written notice about the ACA’s health insurance Exchanges.
This information helps demystify how ERISA and the ACA apply to your business.
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Sources:
Zywave (Employee Benefits Compliance Checklist for Small Employers)
Zywave (Affordable Care Act: 2024 Compliance Checklist)
