When you offer group health insurance to employees, it comes with responsibility.
As a self-insured employer offering health insurance and retirement benefits to your employees and their families, you are held to a set of standards that protect plan participants and ensure that you’re acting in their best interests.
You are a fiduciary.
Amid everyday business, deadlines and meetings, we know that this responsibility is not the first thing you’re thinking of when you start scrolling through morning emails. We get it. This is an important, gentle reminder of what it means to be a plan fiduciary and what ERISA means. It bears repeating because as employers, you are vested in your organization’s greatest asset: your people. Ultimately, that’s what fiduciary responsibility is all about—protecting the people who participate in your plan.
Let’s break this down into simple terms and outline what exactly your role is as an employer and fiduciary of your organization’s benefits plan.
What is ERISA?
ERISA isn’t new. Passed in 1974, the law sets minimum standards for most voluntarily established retirement and health plans in private industry to protect participants (employees, dependents, and beneficiaries who are enrolled in your retirement and health insurance plans). ERISA governs how employers can behave when administering plans for employees, and it gives plan participants the right to file complaints to the Department of Labor (DOL). You can be sued for breach of fiduciary duty. Most recently a plaintiffs law firm is recruiting representatives for a class action against specific health plan fiduciaries.
ERISA-covered benefits plans include: group health plans, health maintenance organization (HMO) plans, life insurance, and flexible spending accounts (FSA). Retirement plans covered by ERISA include 401(k), Roth 401(k), employee stock ownership plans (ESOP), and 403(b).
What is a fiduciary, and what are the responsibilities under an ERISA-covered plan?
A fiduciary has the authority to control and manage the operation and administration of a benefit plan covered by ERISA. Common fiduciaries include HR administrators, plan trustees, investment managers—or professionals who give advice related to the plan. As an employer, you are a fiduciary. Anyone with “discretionary authority” can be considered a fiduciary even if they are not listed as such in the plan.
As a fiduciary of your employee benefits plan, your responsibilities are to:
- Act in the interest of plan participants, their dependents and beneficiaries
- Carry out duties thoughtfully
- Follow the ERISA-covered plan documents
- Pay only reasonable expenses
As fiduciary, you must completely understand the plan and review it periodically to ensure it is relevant to your employee population. Always ask the question: Is the plan serving participants’ best interests?
What decisions related to managing a health benefits plan are not considered fiduciary actions?
Not every decision is fiduciary. The Department of Labor lists these situations as “acting on behalf of the business, not the plan.”
- Establishing a plan
- Determining the benefit package and features
- Amending a plan
- Terminating a plan
But keep in mind, when implementing these business decisions, you are acting on behalf of the plan and may be considered a fiduciary.
What information am I required to communicate with employees as a fiduciary?
As you plan open enrollment communications to explain benefits, keep in mind that participants and beneficiaries must receive a plain language explanation of the plan that defines rights and responsibilities. It includes the benefits, how to file claims, and outlines the duties of the plan and employees. It supplies information about premiums, cost-sharing, deductibles and co-pays. The Department of Labor provides further detail in its downloadable guide, Understanding Your Fiduciary Responsibilities Under a Group Health Plan.
Tips for Employers with Group Health Plans
There are some basic steps you can take to ensure that you’re acting prudently as a fiduciary and on behalf of plan participants. If you offer a group health plan, the Department of Labor recommends these tips:
- Identify plan fiduciaries and explain their responsibilities.
- When hiring third-party service providers, vet a number of options and provide each with the same information. Consider whether their fees are reasonable.
- Document the hiring process.
- Monitor your plan’s service providers.
- Understand the schedule to deposit participant contributions and payments to the plan for forwarding to the insurance company.
- Review the plan and make necessary updates.
- After amending the plan, provide an updated summary plan description to participants.
- Ensure a reasonable claims procedure.
- Monitor transactions with parties who have an interest in the plan.
- File government reports such as Form 5500 in a timely manner.
As you enter benefits renewal time, we encourage you to review these tips and ask questions. We are here as a ready resource to help you deliver the best benefits possible to employees in a responsible way.
About Health Action Council
Health Action Council is a not-for-profit 501(c)(6) organization representing mid-and large-size employers that enhance human and economic health through thought leadership, innovative services, and collaboration. It provides value to its members by facilitating projects that improve the quality and moderate the cost of healthcare purchased by its members for their employees, dependents, and retirees. Health Action Council also collaborates with key stakeholders – health plans, physicians, hospitals, and the pharmaceutical industry – to improve the quality and efficiency of healthcare in the community.