Is your Voluntary Benefits Plan in the ERISA Safe Harbor?

By: Jonathan M. Bernstein GBDS, VBS

More than 80% of “worksite and voluntary benefits” plans are actually subject to ERISA despite employers (and their brokers) believing the plans were exempt. – ComplianceBug, LLC

What is ERISA?

In 1974, Congress passed the Employee Retirement Income Security Act of 1974 (ERISA) as a measure to ensure consumer protection and uniformity.  This established federal authority over employee pension and employee benefits plans. ERISA asserted exclusive federal jurisdiction over self-funded ERISA plans, but permitted the states to regulate carriers that insure employee benefits plans. [1]

How does this effect my Voluntary Benefits Plan?

Within ERISA there is a rule called “Safe Harbor”.  This is a set of standards that exempt a plan from the requirements imposed by ERISA.  If your plan meets these “gray” guidelines, then it is not necessary to complete the many requirements that are mandatory for health and welfare plans to be compliant.  The Safe Harbor Rule is murky at best and if you are not in line with the 4 guidelines, then you will be subject to fines ranging from $110 to $1,100 a day according to the Department of Labor.

What are the guidelines for Safe Harbor?

1. No contributions are made by the employer or an employee organization (union, etc.)
2. Participation is completely voluntary
3. Employers are not allowed in any way to endorse the program, other than allowing the insurance carrier access to the employees and collecting premiums via payroll deduction.
4. Employers may not receive cash or consideration in connection with the program, other than any reasonable compensation, excluding any profit, for administrative services rendered in regards to payroll deductions or check offs. [2]

As you can see the guidelines themselves are challenging to interpret.  This is where Babb, Inc. can help you navigate through the murkiness.  If any of the guidelines are misinterpreted, it may disqualify your plan from the Safe Harbor.  (see Butero v. Royal Maccabees Life Insurance Co.)[3]

What is the fix?

The good news – there is a way to ensure you are compliant and not be subject to a daily fine.

In order to support you and your company with this challenge, Babb has developed a Compliance Toolkit.  This comprehensive toolkit is designed to identify immediate challenges and support your long term compliance plan.  The tool was designed as a simple solution to a complex compliance concern.

“Thomson Reuters’ manual says the Department of Labor is making voluntary benefits options an enforcement priority.”[4]

Jonathan M. Bernstein GBDS, VBS
Senior Account Manager
412-237-2105 | TF: 800-892-1015 | F: 412-231-1633

Sources: [1] 29 U.S.C 1144(b)(2)(A).
[2] 29 C.F.R. 2510.3-1(j).
[3] http://www.wvsd.uscourts.gov/sites/default/files/opinions/503-2507.pdf
[4] Nick Thornton, BenefitsPro Online 8/12/16