Compliance with ERISA

ACCORDING TO a recent study by ERISA Pros, LLC, the majority of U.S. employers with 100 or more employees do not comply with the ERISA requirement to file an annual Form 5500 for their health & welfare benefit plans. U.S. Census Bureau reports show that there are about 110,000 employers that employ 100 or more people. However, according to public records, some 60,000 of these employers have not filed a Form 5500 for a Welfare Benefit Plan; a 55 percent rate of noncompliance.

ERISA is a federal law that regulates employer sponsored benefit plans, such as 401(k), group life, medical, dental, and disability insurance plans. It imposes strict requirements on employers sponsoring these plans to report certain financial information to the Department of Labor annually on Form 5500, and to disclose benefit related information to their Plan participants in a Summary Plan Description (SPD).

ERISA is enforced by the U.S. Department of Labor (DOL), which can penalize an employer up to $1,100 per day that its Form 5500 is filed late. This penalty is cumulative, applies separately to each benefit Plan, is not subject to a statute of limitations, and is not tax deductible to the employer. According to ERISA Pros’ founder, Bernard Kearse, “An employer sponsoring life, medical, dental, and disability insurance plans that files its Form 5500s just 30 days late could be fined $132,000. If that employer earns 8 percent net after tax, it would have to generate $1,650,000 in sales revenue to pay for the government’s fine.”