Editor's note: Katie Clarey is a regular freelancer with HR Dive. Her column, Back to Basics, began three years ago, when she started covering employment law. If you're new to HR (or just need a little refresher), follow along as she speaks with legal experts, peruses federal guidance and lays out the basics of federal employment law. Feel free to send tips, questions and feedback to [email protected].
Emilio works in HR at a shoe manufacturer. He's relatively new to the job, but he likes his department, which is growing.
One day, a sales manager stopped by HR and asked Emilio if she could get a copy of the document his team passed out during open enrollment — the one that broke down the company's 401(k) offering.
Emilio said he'd be sure to drop it off at her desk by the end of the day. But he got pulled into a meeting after lunch, and then he needed to pick up his daughter from school. He forgot about the request the next day, and he didn't remember it for several weeks.
The worker's request came rushing back to him when he got an email from the worker's accountant, who said Emilio could get his company in trouble if he failed to produce the document in question. Emilio started to worry. Was the accountant right? He simply forgot the worker had asked — could it really be that big of a deal?
As he pondered these questions, he thought back to his onboarding. His manager had mentioned something about these kinds of documents and the importance of delivering them to employees promptly. But why were they so important?
What is ERISA?
I wanted to help out Emilio, figment of my imagination or not. So I called up Cassandra Labbees, a member at Epstein Becker Green who worked as an investigator at the U.S. Department of Labor's Employee Benefits Security Administration for eight years.
According to Labbees, Emilio found himself in a hypothetical pickle because his actions — or lack thereof — violated the requirements spelled out in the Employee Retirement Income Security Act of 1974.
ERISA is a statute that sets the minimum standards for most voluntarily established retirement and health plans in the private sector. "It's designed to protect participants and beneficiaries, the employees who are eligible to participate in the plans or who are participating in those plans," Labbees said.
DOL lays out ERISA's most basic requirements online, but I'll save you some reading. ERISA requires plans to provide participants with information about features and funding. It sets standards regarding participation, vesting, accrual and funding. It determines fiduciary responsibilities for those who manage and control plan assets. It provides participants a right to sue over benefits and breaches of fiduciary duty.
That's ERISA in a nutshell, though there's more to the story. As Labbees says, the statute is "very technical," so she recommends HR pros take it chunk by chunk, one step at a time.
HR's ERISA role is heavy on day-to-day tasks
Many of ERISA's basic requirements fall to HR. "Despite not making fiduciary decisions as an HR professional, some of the day-to-day tasks that ERISA requires may fall on you," Labbees said.
For instance: If someone asks for information about a retirement plan, employers have 30 days to comply. "Usually, you're going to HR for that information," Labbees remarked. A forgotten document may seem like a small problem, but small problems can lead to big fines under ERISA, Labbees warned. And document provision is the most frequent problem she sees.
"Someone may ask for a copy of their summary plan description. If it's been six months and they haven't heard, they may get an attorney involved," Labbees said. "Those are basic, fundamental obligations in the eyes of the DOL. They should be very easy to comply with because you should have copies ready to provide. But it's something I see happen all the time."
It's a similar situation for filing Form 5500, Labbees said. The form was developed by DOL, the IRS and the Pension Benefit Guaranty Corporation, and employers have to turn it in annually. Forgetting to file the form can cause major fines, and DOL just raised the price: "It's over $2,000 per day for failure to file," Labbees said. "And the IRS has their own separate penalty it can assess for failure to file."
In addition to sticker shock, ERISA included another element to compel compliance. "The statute basically says that you can be personally liable as a fiduciary," Labbees said. "Most HR professionals aren't fiduciaries. But the way the law is written, there's significant liability for fiduciaries."
Partner up, and partner well
ERISA allows employers to delegate some of their responsibilities to third party administrators and vendors. While a partnership erases some of the work for HR pros, it doesn't dissolve HR of all responsibility. "You still have a duty to monitor, to ensure the obligations are followed," Labbees said. "And that duty often falls on HR."
The statute does not accept the argument that a delegate assumes the legal exposure for delegated tasks that were botched, Labbees said.
"HR professionals need to be aware of these vendors and these third party administrators and what they're doing and whether they're complying," Labbees said. "They need to review service provider agreements and ask questions about what role the service provider will play in a relationship."
To that end, HR needs to ensure that it picks good partners to administer plans. Good partners will work with HR to ensure errors are caught and resolved quickly. If money isn't deposited into a 401(k) as a plan calls for, for example, it's worse if that error exists for a long time, Labbees said.
'Take it one step at a time'
ERISA is not an easy statute to understand. "It's a lot. It's very technical and in some ways clunky and confusing," Labbees said. "It can be overwhelming, but just take it one step at a time as an HR pro."
Multiple resources exist to help HR pros wrap their brains around ERISA. DOL has published many communications written in a comprehensible style for employers and benefits pros. These documents don't necessarily cite the statute. Instead, they explain what obligations employers assume when offering a certain plan. Law firms also put out communications about the bigger, developing issues, and they're faster than the government, Labbees noted.
And HR pros can always count on external compliance help, too. "Lean on your consultants and your partners," she said. "Ask them to provide you with all the necessary information that helps you do your job."