What Type of Employee Welfare Plans Are Not Subject to ERISA Regulations?
The federal Employee Retirement Income Security Act (ERISA) regulates most retirement and health plans private employers offer employees. However, not every employee welfare plan falls under ERISA’s purview. ERISA does not typically cover government and religious employers or plans maintained solely to comply with certain state laws.
Complying with ERISA can be complicated, as can filing claims based on the complex regulations ERISA sets. Our ERISA claim attorney can help if you need to verify ERISA compliance or file an ERISA claim. We have been helping real people recover what they are entitled to for over two decades.
How Do ERISA Regulations Work?
Employee welfare plans are a type of benefit plan that provides medical benefits in the case of sicknesses, accidents, or death. ERISA covers private employers that offer health and retirement benefits plans.
When an employer provides an ERISA-covered plan, the employer and those involved in maintaining and administering the plan enter into a fiduciary relationship with the employee beneficiaries.
ERISA regulates private employer-sponsored employee welfare plans by setting minimum standards regarding who qualifies for benefits, how long it takes to qualify, and how benefits accumulate. It also requires employer sponsors to maintain adequate funding and inform beneficiaries of their rights.
Under ERISA, covered employees can file claims for benefits or for a breach of a fiduciary duty. Both claim types allow employees to recover benefits, but breach of fiduciary duty claims can be broader and apply to mismanagement of plan funds and options.
However, keep in mind that not all welfare plans are subject to ERISA.
What Type of Employee Welfare Plans Are Not Subject to ERISA Regulations?
Employee welfare plans exempt from ERISA fall into two categories: exempt employers and exempt plans. Each category has its unique nuances.
Exempt Employers
Typically, government and religious employers are exempt from ERISA. Government employers generally offer benefits regulated by state or other federal laws. However, the “church plan” exemption is more complex.
Church employers, conventions or associations of churches, and church-controlled or church-affiliated organizations that are exempt from taxes are also exempt from ERISA.
The exact borders of what qualifies as a church plan are still being established. Church-affiliated non-profit hospital plans may not be subject to ERISA. However, questions remain about the level of church control or affiliation an organization needs to be exempt from ERISA.
Exempt Plans
ERISA does not cover plans you do not obtain through your employer. For example, if you purchase your healthcare through the Marketplace with funds from your own pocket, you did not obtain that plan through your employer.
Additionally, plans an employer establishes or maintains solely to comply with certain other laws may be exempt. For instance, plans that exist to comply with the following laws may be exempt:
- Workers’ compensation,
- Unemployment, and
- Disability.
To be covered by ERISA, employer-sponsored plans must be voluntary. Plans the law compels employers to offer are not voluntary and, therefore, not covered by ERISA. There are pros and cons with both covered and non-covered plans.
Practical and Compliance Issues with Non-Covered Plans
As a federal law, ERISA supersedes state law that attempts to regulate the same area. Having one law that applies across state lines establishes uniform standards, providing several practical and compliance-related benefits. However, there are pros and cons of ERISA coverage.
Practical Pros and Cons
ERISA coverage has many practical benefits, like:
- Eased administrative burdens at the state and local levels,
- Employers have a set standard to follow,
- More experts are familiar with the law and able to help with issues,
- Beneficiaries are guaranteed certain protections and are less likely to be taken off-guard by coverage omissions,
- Individual states and employers cannot change or refuse coverage for arbitrary reasons, and
- Multi-state employers can maintain the same protections in several states.
Notably, ERISA is a floor, not a ceiling, so employers that want to offer greater benefits may.
Some of ERISA’s practical cons include:
- Higher administrative burdens at the federal level,
- Employers may be discouraged from voluntarily offering better benefits, and
- States may not choose to pass laws providing greater protection.
For most individuals, ERISA coverage benefits employees more than harms them.
Compliance Pros and Cons
ERISA coverage offers many compliance-related benefits as well, including:
- Clearer standards,
- Well-established ways to file claims,
- More experts are available to advise you, and
- More resources to help you comply.
There are some compliance drawbacks to ERISA coverage as well, like:
- Working through the overburdened federal system,
- Some inflexibility, and
- Understanding the interrelated parts of the law.
Despite these potential detriments, many employees prefer having ERISA coverage over not having it.
The Peace Law Firm Knows ERISA
ERISA is a complex federal law that regulates employer benefits plans, including employee welfare plans. Whether a plan is subject to ERISA depends on what type of employer is offering the plan and whether they offer it voluntarily.
These categories can be blurred, however, confusing employers and employees alike. If you need help understanding what plans ERISA does and does not cover, ensuring your employee welfare plan complies, or filing an ERISA claim, the Peace Law Firm can help. Contact us today for a free consultation.
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