If your business offers retirement plans or other perks, it is important to know about a law called the Employee Retirement Income Security Act (ERISA). This law sets rules for how employers must handle employee benefits.
Be sure you understand what ERISA is and the potential penalties you could face for non-compliance.
What is ERISA?
ERISA is a federal law that sets standards for private employers who offer pension and health plans for their employees. It aims to protect employees’ interests by establishing rules for reporting, disclosure and fiduciary responsibilities related to these benefit plans. ERISA applies to most private employers that offer retirement or welfare benefit plans to their employees.
Fiduciary responsibilities
Under ERISA, employers who sponsor employee benefit plans have fiduciary responsibilities. Employers must act in the best interests of plan participants and beneficiaries when managing the plan and its assets. This includes duties of loyalty and prudence that require employers to make decisions that benefit plan participants and ensure the financial stability of the plan.
Reporting and disclosure
ERISA also imposes reporting and disclosure requirements on employers offering employee benefit plans. Employers must provide employees with information about the plan’s features, funding and investment options. They must also file annual reports with the Department of Labor and to provide summary plan descriptions to participants.
Potential penalties
Failure to comply with ERISA’s requirements can result in significant penalties for employers. These may include fines, excise taxes and potential lawsuits from employees or the DOL. Employers may be subject to penalties for failure to meet any of the ERISA requirements.
As an employer, it is important to stay informed about ERISA requirements and seek guidance if needed to ensure compliance with the law.