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ERISA Demands Plan Sponsor Accountability

By Alliant Employee Benefits / March 01, 2023

The Consolidated Appropriations Act of 2021 introduced key disclosure requirements for group health plans, rooted in their fiduciary duties under ERISA. For private sector companies offering a group health plan, the requirement to comply with ERISA fiduciary duties adds layers of liability and risk. The Department of Labor (DOL) issued similar requirements for retirement plan service providers nearly a decade ago, which led to enhanced retirement plan transparency and, ultimately, a significant increase in litigation against retirement plans.

Did You Know?

In 2020 alone, 1 in 3 audits of health and welfare plans resulted in the employer having to pay a fine of $10,000 or more, while class-action litigation has given rise to million-dollar payouts by plan sponsors. The hard truth is that this type of agency enforcement and litigation continues to rise.

These ERISA-related class action cases almost always include allegations of excessive fees and accusations of plan mismanagement. Plan sponsors can help protect themselves from these types of claims with proactive plan management and an established process around health plan decision-making.

What could prompt a DOL audit?
Employee benefit plans are subject to review for many reasons. Here are the most common reasons why the DOL might act:

  • Complaints brought to the DOL
    Such as an employee citing mismanagement of a health and welfare plan. 

  • Missing reporting deadlines
    Plan sponsors failing to file required annual reports or forms on time.

  • Standard auditing
    Plan sponsors may be subject to audit as part of the DOL’s normal operations.

  • Other agencies may initiate audit
    Another agency, such as the IRS, may raise concerns that warrant a closer look.

What can employers do to protect themselves?

Transparency is paramount for plan sponsors. 

Group health plans should have consistent, clear, and compliant processes and records. A reactionary response is too late when it comes to protecting yourself from agency penalties and potential litigation.

A trusted advisor who is well versed in health and welfare plan compliance can help to:

  • Document benefits committee meetings and plan-related decisions compliant note-taking.

  • Provide plan sponsor documentation, from plan performance and cost evaluation to broker compensation disclosures.

  • Train benefits professionals on their role and duties as a plan sponsor fiduciary.

Compliance requires diligent attention due to its ever-evolving state. Inadequate documentation, misinformation, and outright confusion regarding ERISA-related fiduciary duties can lead to mistakes and make the plan vulnerable to litigation, despite the plan sponsor’s best intentions.

Reducing fiduciary liabilities can be simple when working with a provider with expertise, who understands the landscape and provides turnkey solutions to support fiduciary compliance.

Disclaimer: This document is designed to provide general information and guidance. Please note that prior to implementation your legal counsel should review all details or policy information. Alliant Insurance Services does not provide legal or tax advice, or legal or tax opinions. If a legal or tax opinion is needed, please seek the services of your own legal or tax advisor. This document is provided on an “as is” basis without any warranty of any kind. Alliant Insurance Services disclaims any liability for any loss or damage from reliance on this document.