BASE^® Blog

The Employee Retirement Income Security Act (ERISA) is a federal law to protect employees participating in employer-sponsored benefit plans.  Despite the fact that ERISA is required, there are several myths and common misconceptions around ERISA making it difficult to understand. 

ERISA was designed to protect employees and mandates that health plans must be in writing.  The Summary Plan Description and Plan Documents fill in the gaps of other documentation to help comply with federal regulations. 

The BASE® ERISA Wrap is designed to wrap around existing certificates of insurance and benefit plan booklets to provide the required provisions and information and protect the plan and the employer from steep penalties and fines. 

MISCONCEPTION:  Plan Documents are optional.

It is a common misconception that Plan Documents are optional, but ERISA has strict requirements for these types of documents.  Many employers mistakenly assume that insurance contracts, certificates of insurance and benefits summaries fulfill the ERISA requirements for a Summary Plan Description (SPD) and Plan Documents, but they don't include the required or recommended provisions that protect the plan and the employer.

MISCONCEPTION:  Carrier documents are all that employers need to be in compliance.

Compliance gaps present a real problem for employers without the proper documentation in place.  Carrier documentation lacks some required information, including:

• ERISA plan numbers
• Plan Administrator (Employer or Carrier)
• If employer is part of the Pay or Play Provision of the Affordable Care Act
• Grandfathered Disclosure, which must be included if medical plan still grandfathered

 MISCONCEPTION:  ERISA only applies to very large companies.

Virtually all employers, regardless of size or number of participants should have an ERISA Wrap in place to satisfy federal requirements. ERISA applies to virtually all employer-sponsored benefit plans, regardless of size.  If one employee participates, ERISA applies. 

 The BASE® ERISA Wrap combats these misconceptions and delivers a solution with a customized Wrap SPD and Wrap Plan Document with the required ERISA provisions and information to achieve compliance.  To learn more about BASE® ERISA Wrap, contact BASE® at 888.386.9680 or visit www.BASEonline.com.

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When health benefits are delivered on a pre-tax basis, there could potentially be discrimination in favor of employees who earn more and because they could potentially reduce the taxes employers have to pay on benefits. The IRS mandates annual testing to prevent this kind of discrimination, otherwise known as Non-Discrimination Testing (NDT).

What do businesses need to know about NDT?

What is it?

Non-Discrimination Testing evaluates the fairness of the health benefits, such as an HRA and/or the 125 Cafeteria Plan, to ensure they are accessible to all eligible employees, not just the highly compensated employees on a yearly basis. 

The BASE® Non-Discrimination Testing takes out the guesswork as the employer determines if there is discrimination between employees at the company and offers assistance to comply with all regulations to maintain the tax-favored status. 

What plans does NDT apply to?

Health Reimbursement Arrangements and 125 Cafeteria Plans. 

When should an employer test?

NDT should be performed by the last day of the current plan year and include all the employees who were employed on any day during the plan year.  But it is also recommended that the employer tests in the middle of the plan year in case there are any additional steps that should be taken to ensure the employer passes the test by the end of the plan year. 

What if the business doesn’t pass NDT?

The employer-sponsored health benefit plans may fail if one or more non-discrimination tests favor highly compensated employees/key employees and other employees at the company.  Such as, lower contributions, availability of more benefits, higher level of benefit reimbursement, and more.  BASE® will provide the employer with the information on the reason and have recommendations to bring your plans into a passing status. 

NDT is not a choice, and it can be confusing and challenge.  BASE® can provide employers with the assistance to comply with Non-Discrimination Testing rules and regulations, contact BASE® at 888.386.9680 or visit www.BASEonline.com to learn more.

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