2026 Newfront ERISA for Employers Guide
ERISA for Employers:
An Overview of EB’s Overarching Legal Framework
2026 Edition
Audio
Presented by: Brian Gilmore | Lead Benefits Counsel, VP
ERISA: The Big Picture
The Overarching Legal Framework for Employee Benefit Plans
- ERISA = The Employee Retirement Income Security Act of 1974 (as amended)
- Originally enacted largely in response to the collapse of Studebaker’s pension plan in 1963 as a measure to better govern employer-sponsored benefits
- The comprehensive federal legal standard included employer-sponsored health and welfare plans (even though not the focus at the time)
- Particularly since the introduction of the ACA in 2010
ERISA for Employers Topics for Discussion
- Plan Document and SPD: Understanding the role of wrap documents to satisfy ERISA requirements
- Form 5500: When the reporting requirement applies, the potential penalties, and distributing the SAR to employees
- Fiduciary Duties: A practical look into the core four ERISA fiduciary duties for employers, including J&J case implications
- Eligibility: Establish clearly defined eligibility classes and conditions consistently applied to avoid issues
Which Employers are Subject to ERISA?
General Rule:
Employers Are Subject to ERISA Unless an Exception Applies
ERISA applies to certain employee benefit plans that are established or maintained by employers (or employee organizations representing employees) engaged in:
- Commerce
- Any industry affecting commerce; or
- Any activity affecting commerce
Designed as a sweeping coverage rule interpreted broadly by courts to include all employers (including nonprofits) with employees unless an exception applies.
Plan Must Have Employees
The plan must cover at least one employee for ERISA to apply. ERISA does not apply for plans covering only self-employed individuals or partners.
Exception: Governmental Employers
- ERISA does not apply to a plan sponsored by the federal government, a state or local government, or any agency or instrumentality of such governmental entity
- Includes federal employees, school districts, state government agencies, cities, counties, etc.
Exception: Church-Based Employers
- ERISA does not apply to a plan sponsored by a church or by a convention or association of churches that is tax-exempt
- Generally includes church-affiliated hospitals
- Does not include plans for church employers where employee services are for unrelated trades or businesses
Exception: Indian Tribal Employers
- ERISA does not apply to a plan sponsored by an Indian tribal government, subdivision of an Indian tribal government, or an agency or instrumentality of either
- Applies only where the employees’ services are essential
Plan Document and SPD
The Wrap Documents
ERISA requires two different types of documents as the foundation of establishing and maintaining a health and welfare benefits plan.
| Plan Document(§402) | Summary Plan Description(§102) |
|---|---|
| Every employee benefit plan subject to ERISA must be established and maintained pursuant to its written plan document. Must meet a number of content requirements. Think of this as the formal legal document governing plan benefits. The plan document must be executed by the employer plan sponsor. Generally not provided to employees except upon a written request made by the employee or dependent. Must be provided within 30 days of the written request to avoid potential $110/day penalties. Request typically arises only in litigation context | The SPD is the employee-facing version of the plan document. Must be “written in a manner calculated to be understood by the average plan participant. Must meet a number of content requirements designed to satisfy the requirement that it be “sufficiently accurate and comprehensive to reasonably apprise” employees of their “rights and obligations under the plan.” Employer must follow specific distribution method and timing rules in providing to employees. No specific penalties for failure to provide other than the $110/day penalty for failure to respond to written request within 30 days. However, failure to provide will cause problems! |
ERISA Plan Document and SPD
ERISA requires two different types of documents as the foundation of establishing and maintaining a health and welfare benefits plan.
Plan Document (§402)
Content Requirements
- Named fiduciary
- Funding arrangement (if applicable)
- Allocation of responsibilities
- Plan amendment and termination procedures
- Group health plan law compliance references
Summary Plan Description (§102)
- Employer name/address
- Employer EIN
- Type of plan
- Type of administration
- Employer address and contact information
- Person designated as agent for service of legal process
- Trustee information (if applicable)
- Plan year
- Eligibility information
- Description of plan benefits
- COBRA rights
- Claims procedures
- Actions that could cause participants to lose rights to benefits
- Statement of ERISA rights
- Subrogation/reimbursement provisions
The Wrap Plan Document and SPD
Two Sets of Documents in Aggregate for the Plan Doc and SPD
The Wrap Plan Document and Wrap SPD
- Insurance Carrier and TPA Materials*
*Evidence of Coverage (EOC), Certificate of Coverage (COC), Policies, Certificates, Benefits Summaries, etc.
Why Use a Wrap Plan Document and SPD?
- No reason for employers to attempt to restate and maintain the detailed benefit listing in the documents already made available by carriers and TPAs
- Attempting to specifically list benefits would run serious risk of conflicting language between the two sets of documents— which is a recipe for challenges and lawsuits
- The wrap documents therefore “wrap” around the carrier and TPA docs to satisfy the ERISA-required plan document and SPD language
Typically Covers All H&W ERISA Benefits
One “mega wrap” plan ensures one Form 5500
The Wrap Plan Document and SPD
ERISA H&W Plans to Include in Wrap Plan Document and SPD
- Medical, Dental, Vision
- HRA (may have separate document)
| Include(ERISA) | Do Not Include(Non-ERISA) |
|---|---|
| Medical,Dental,VisionHRA(may have separate document)Health FSA(may have separate document)Accidental Death and Dismemberment(AD&D)EAP(even if embedded in LTD or GTL)Disability(STD may not be subject to ERISA)Wellness Program(if provides medical benefits like biometrics)Executive Physical(may have separate doc)Group Term Life(GTL)Expatriate and BTA plans maintained in U.S.TelemedicinePrepaid Legal ServicesEmployee-Paid“Voluntary”Benefits(that don’t meet voluntary plan ERISA exemption) | Adoption and Tuition AssistanceDependent Care FSA and Cafeteria Plan POPCommuter BenefitsAuto and Home InsuranceVacation,Sick Pay,PTO(Unfunded)Paid Family Leave and State Mandated Disability(including VDI)Pet InsuranceHSA(the bank account,not the HDHP)Workers’CompensationIdentity Theft Protection401(k)(ERISA plan not included in H&W wrap)Voluntary Plans(that meet the complex ERISA safe harbor exemption)Lifestyle Spending Account(LSA)Trump Accounts |
Distribution Timing Rules for SPDs and SMMs
Employers must provide the SPD and any Summary of Material Modifications (SMM) within the timeframes set by ERISA:
- New Plans: Within 120 days of plan establishment
- Newly Covered Participants: Within 90 days after participant first covered
- OE materials and new carrier/TPA documents typically satisfy the SMM rules (and are typically the only SPD content modified each year)
- No requirement to provide new wrap SPD annually, no acknowledgement of receipt form required
- U.S. mail delivery and in-hand delivery both permitted, electronic delivery rules on next slide
Electronic Distribution
The ERISA electronic disclosure safe harbor regulations for health and welfare plans are unfortunately becoming quite antiquated. Some employers choose to operate outside the safe harbor after carefully considering the landscape.
Safe Harbor
Employees with Work-Related Computer Access Integral to Their Job Duties
- No employee consent required—these employees can receive electronic distribution of ERISA materials (e.g., SPD) by default (i.e., opt-out)
- Must include notice of significance of the document in the disclosure, as well as the right to request and obtain paper version of the documents
Employees without Work-Related Computer Access Integral to Job Duties
- Safe harbor is sometimes misunderstood as a requirement—it is not
- Employers can choose to operate outside the safe harbor by using electronic disclosure without affirmative consent from employees without work-related computer access
Best Practice Considerations
Posting on Intranet, Ben Admin, Benefits Portal or Website, etc. Best Practice to Notify Employees of Newly Posted Materials
- Employers should provide notice to employees to inform them of the new materials posted apprising them of the significance of those documents. This can be via email, Slack, Teams, etc. Example for SPD:
- The newly posted documents are part of your Summary Plan Description (SPD) to the [Enter Plan Name] (Plan). You should review this information carefully, share it with your covered dependents, and keep this information with other Plan materials for future reference. In the event of a conflict between the official Plan Document and these materials, the official Plan Document will govern.
ERISA Record Retention: Best Practice to Retain Documents for Eight Years
- For employee benefit plan purposes, the general records retention best practice is to keep ERISA-related records for eight years to comply with the ERISA §107 to preserve for at least six years after the applicable Form 5500 filing deadline.
- Form 5500 may be filed up to 9 ½ months after the end of the plan year, so eight years will always satisfy that requirement (with an additional buffer).
Written Request for ERISA Documents
| Documents That Must Be Provided Upon Receipt of Written Request | Practical Considerations Plus Best Practices |
|---|---|
| The latest SPDThe latest Form 5500The bargaining agreement (union multiemployer plans)The trust agreement(for plans funded by a trust)Any contract or other instruments under which the plan is established or operatedEmployees/dependents may request the documents requirement applies only to written requests | Treat request for SPD as a request for the wrap SPD and the relevant carrier/TPA benefit summaries. While the wrap plan document is not explicitly listed, courts state it is also required as an instrument under which the plan is operated. Only current documents are technically required, but employers should provide prior documents where the matter at issue relates to older materials. |
Form 5500
Reporting Requirements
Employers that sponsor ERISA health and welfare plans may be subject to Form 5500 reporting requirements. The Form 5500 is referred to as a “return/report” because it is a consolidated filing with both the IRS and the DOL.
| General Filing Requirements: Seven Months After the End of the Plan Year | Small Plan Exception: Fewer Than 100 Covered Participants |
|---|---|
| ERISA Plan Year Controls: • Governed by the wrap plan document and wrap SPD • Insurance policy year or OE timeframe not relevant • Most wrap plan documents and wrap SPDs are a “mega wrap” plan 501 for all ERISA H&W benefits under one ERISA plan for one Form 5500 filing | Participant Count Determined First Day of Plan Year: • Form 5500 filing is not required if the plan had fewer than 100 “covered participants” on the first day of the plan year • Looks only to covered employees or former employees on COBRA (does not include spouses and dependents) |
| Standard Deadline to File: • Employer must file the Form 5500 with the DOL by the last day of the 7th month after the end of the plan year • July 31 deadline for calendar plan year | Look to All H&W Benefits: • Covered participant count includes any ERISA benefit • Plan with 100 employees covered by a GTL, disability, or AD&D benefits would require filing even if under 100 employees in medical, dental, vision benefits |
| Extension to File: • Automatic 2½ month extension available by filing Form 5558 with IRS in advance of deadline • October 15 deadline for calendar plan year | Where the Small Plan Exception Does Not Apply: • No exemption from Form 5500 filing for a MEWA, plan funded by a trust, or retirement plan (including 401(k)) regardless of covered participant count. |
Failure to Timely File the Form 5500
The Form 5500 penalties are potentially very large! Civil penalties can exceed $2k per day, which adds up to a very large liability for long-term failures. Fortunately, there is a DFVCP process to voluntarily come forward to the DOL and significantly reduce the potential liability.
| Potential Civil Penalties for Failure to File | DFVCP Process to Avoid Large Penalties |
|---|---|
| $2,739/Day Maximum Indexed Annually for Inflation | $10/Day Maximum $4,000/Plan Maximum |
| Up to $2,739/day late penalty for Form 5500 filing failures. DOL may not impose full penalties—they can take into consideration the degree and/or willfulness of the failure. Regardless, where the failure has been ongoing for a long period, those penalties can be very large. For multiple missed years, penalties apply to each year's Form 5500 cumulatively with no apparent statute of limitations for prior years. DOL may waive all or a part of the penalties upon written statement under penalty of perjury of reasonable cause for the failure based on all relevant facts. Potential criminal penalties for willful violations could include $100,000/individual, $500,000/employer fine, and/or up to 10 years of imprisonment. | Delinquent Filer Voluntary Compliance Program(DFVCP) Available as a way for employers to come forward with late and unfiled Forms 5500 for significantly reduced penalties. DFVCP filings are available only where the employer is voluntarily submitting the Forms 5500 prior to being notified in writing by the DOL of the failure to timely file. DFVCP penalty is $10 per day late based on the original deadline seven months after the end of the plan year (the Form 5558 2½ month extended deadline is not used). The DFVCP penalty is capped at $2,000 per year, with a $4,000 overall per plan cap for multiple late filings. DOL DFVCP Penalty Calculator: https://www.askebsa.dol.gov/dfvcepay/calculator |
The Summary Annual Report (SAR)
SAR Distribution Required to Employees
What is the SAR?
- An employee-facing summary of the information contained in the most recent Form 5500 filing
- Think of it along the lines of an SPD designed as employee-facing material to summarize the plan document
- Not required if no Form 5500 filing or if all H&W benefits in the plan are self-insured with no trust (rare for umbrella mega wrap H&W plans)
What Information is Contained in the SAR?
- Funding arrangement (self-insured or fully insured), insurance carrier information (including total premiums), financial statement where funded by trust (rare for H&W plans), disclosure about employee right to obtain additional information from the full Form 5500
- Reality check: Vast majority of employees will not find anything in the H&W plan SAR particularly useful, relevant, or interesting
Fiduciary Duties
The Core Four Duties
ERISA Fiduciary Duties
Derived from trust law – described by courts as “the highest duties known to the law.”
Duty of Loyalty (Exclusive Benefit Rule)
- Requires employers to act solely in the interest of plan participants and beneficiaries with respect to any fiduciary function
- Commonly arises in the context of MLR rebates or similar carrier rebates to the employer
- Portion of the rebate attributable to employee contributions is considered plan assets that must be used for the exclusive benefit of participants and beneficiaries
ERISA §404(a)(1)(A):
(1) Subject to sections 403(c) and (d), 4042, and 4044, a fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and—
(A) for the exclusive purpose of:
(i) providing benefits to participants and their beneficiaries; and
(ii) defraying reasonable expenses of administering the plan;
Duty of Prudence
- Employers must act with the skill, prudence, and diligence of a prudent person acting in like capacity
- Commonly arises in the context of the fiduciary duty to prudently select and monitor plan service providers with an appropriate method based on the facts and circumstances
Duty of Diversification
- Requires employers to diversify investments of the plan to minimize risk of large losses, unless clearly not prudent to do so under the circumstances, where there are plan assets held in trust
- Commonly arises in the retirement plan context where there are plan assets held in trust
Duty to Follow Plan Terms
- Must administer the plan in accordance with its written terms in documents governing the plan
- Commonly arises in the context of employee requests to make an exception to the plan terms to provide additional benefits not covered under the written terms of the plan
ERISA Claims/Appeals Procedures
ERISA requires that appeals be determined by “an appropriate named fiduciary of the plan” to ensure a “full and fair review” of the claim and appeal.
Special Issues
The Other ERISA Highlights
ERISA Federal Preemption
- Express Preemption Clause
- ERISA expressly preempts state laws that relate to employee benefit plans
- Generally means that state laws and state court orders relating to employee benefit plans are not enforceable against the plans
Wrap-up
Takeaways
| 1. Plan Document/SPD | 2. Form 5500 | 3. Fiduciary Duties | 4. Eligibility | 5. Special Issues |
|---|---|---|---|---|
| ·Plan document is the formal legal document governing the plan | ||||
| ·SPD is the employee-facing version of the plan document | ||||
| ·“Wrap” plan document and SPD are used in conjunction with carrier/TPA materials to satisfy ERISA content requirements in aggregate | ·Generally applies to plans with 100 or more covered participants on the first day of the plan year | |||
| ·Filing is due to the DOL by the last day of the 7th month after the end of the plan year | ||||
| ·Automatic 2½ month extension available with Form 5558 filed with IRS | ||||
| ·Enormous potential penalties for filing failures can apply | ·Duty of Loyalty (Exclusive Benefit Rule): Requires employers to act solely in the interest of plan participants and beneficiaries with respect to any fiduciary function | |||
| ·Duty of Prudence: Common application is duty to prudently select and monitor plan service providers | ||||
| ·Duty of Diversification: Applies where plan assets held in trust, which is uncommon for health and welfare plans | ||||
| ·Duty to Follow Plan Terms: Common concern where employees request eligibility or benefits exceptions | ·Most employers set health plan eligibility at 30 hours per week (or lower) to align with ACA employer mandate | |||
| ·Common eligible dependents are spouse, domestic partner, and children under age 26 | ||||
| ·ERISA requirement to administer and maintain plan pursuant to written terms (and carrier/stop-loss concerns) make exceptions extremely problematic and to be avoided wherever possible | ERISA Federal Preemption | |||
| ·Express Preemption Clause | ||||
| ·The Savings Clause | ||||
| ·The Deemer Clause | ||||
| ·Self-insured plans not subject to state insurance mandate | ||||
| ·Most state court orders also preempted |
Content Disclaimer
The intent of this analysis is to provide the recipient with general information regarding the status of, and/or potential concerns related to, the recipient’s current employee benefits issues. This analysis does not necessarily fully address the recipient’s specific issue, and it should not be construed as, nor is it intended to provide, legal advice. Furthermore, this message does not establish an attorney-client relationship. Questions regarding specific issues should be addressed to the person(s) who provide legal advice to the recipient regarding employee benefits issues (e.g., the recipient’s general counsel or an attorney hired by the recipient who specializes in employee benefits law).
Thank you
Brian Gilmore