Health plan fiduciary risks are growing: Advisors hold the key to compliance

This is where advisors add value: by helping clients navigate who is covered, who is exempt, and what actions they must take.

Who is covered under ERISA?

ERISA applies to most private-sector employers offering health or welfare benefit plans. If an employer is not a governmental body or a religious institution, and offers benefits like medical insurance, dental, or disability coverage, chances are high they are within ERISA’s jurisdiction.

Plans that typically fall under ERISA include:

• Employer-sponsored medical, dental and vision plans
• Prescription drug benefits
• Group life insurance
• Short- and long-term disability insurance
• Health FSAs and HRAs
• Accidental death and dismemberment coverage
• Wellness programs that include medical services
• Employee assistance programs with counseling or clinical services
  

If a plan is funded, sponsored, or administered by a private-sector employer and provides a benefit described in ERISA’s definition of a welfare plan, it is almost certainly covered.

Who is exempt?

Several categories of plans are not subject to ERISA. These include:

• Plans offered by federal, state, or local governments
• Plans sponsored by churches or religious organizations
• Workers’ compensation or unemployment insurance programs mandated by state law
• Voluntary plans with no employer contribution or involvement
• Retiree-only health benefits not tied to ongoing employment
• Certain multi-employer plans maintained outside the employer’s jurisdiction
  

Make sure your clients understand that offering health benefits through a private insurer doesn’t exempt them from ERISA. If they play any role in sponsoring or administering the plan, ERISA likely applies. A lot of companies think because they are fully insured with a carrier, they are exempt and that is not the case.

Why this matters now

With growing enforcement focus on fiduciary responsibilities, especially around health plans, advisors must help clients evaluate whether their current benefit programs trigger ERISA requirements.

If a plan is covered by ERISA, employers are responsible for:

• Maintaining a written plan document
• Providing employees with a summary plan description (SPD)
• Establishing a formal claims and appeals process
• Complying with fiduciary standards and acting in employees’ best interests
• Filing Form 5500 (if applicable based on plan size and funding method)
  

Failure to comply can lead to steep penalties, litigation exposure and loss of employee trust.

The benefits advisor’s role

Brokers are uniquely positioned to be strategic advisors, not just vendors of insurance products. With compliance and fiduciary expectations rising, now is the time to initiate proactive conversations with clients about ERISA obligations.

Review their current plan lineup and help them:

• Identify which plans are subject to ERISA
• Confirm whether documentation, monitoring and reporting are in place
• Understand their fiduciary role under ERISA if they manage or oversee plan operations
  

Clarity builds compliance, and compliance builds trust. In today’s regulatory environment, that’s not just a value-add, it’s a must-have.

If your clients are unsure whether their benefits fall under ERISA, now is the time to address that confusion. With the right guidance, you can help them avoid exposure, fulfill their fiduciary obligations, and continue offering meaningful benefits with confidence.

For more information on what a fiduciary decision making process would look like, check out the Business of Benefits podcast on all podcast platforms.