The Employee Retirement Income and Security Act of 1974, or ERISA, is a federal law that created rules and procedures to protect most private employee pension and health plans from fraud and mismanagement.
Many types of employee pension and health plans, including employer-sponsored health care, fall under ERISA. All private employers and employee organizations, such as unions, that offer health plans to employees have to follow ERISA. Only churches and government groups are exempt.
If you offer your employees health coverage, you’ll have to follow certain rules and procedures as a result of ERISA.
What does ERISA require?
ERISA doesn’t tell you what kinds of benefits you have to provide or how many. It only sets rules for managing most employer-sponsored pension and health plans. Most of these have to do with providing and reporting information. For example, you must:
- Provide a summary plan description to employees that includes information about the plan’s premiums, deductibles and copays
- File an annual report with the federal government
- Meet certain standards, such as nondiscrimination in premiums and eligibility
What else should I know about ERISA?
There are two types of ERISA groups: fully insured and self-funded. A fully insured group purchases insurance through a company like Blue Cross Blue Shield of Michigan or Blue Care Network. A self-funded group, as the name suggests, funds its own plan and pays for employee health care.
There are important differences between these two groups in liability and which laws apply. We recommend you get legal advice to figure out which laws affect you.
For more information, read these helpful resources from the United States Department of Labor.
- Report and Disclosure Guide for Employee Benefit Plans (PDF)
- The Health Benefits Advisor for Employers is a page that helps you learn about the federal laws that can affect health benefit coverage provided by group health plans.