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ERISA for Nonprofit CEOs
1. ERISA for the Nonprofit
CEO
Theodore P. Stein
Whiteford, Taylor & Preston, LLP
Simone Putnam, Raffa Managed HR
Thursday, October 24, 2013
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Thrive. Grow.
Achieve.
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Employee Retirement Income Security Act of
1974, 29 U.S.C. §1001, et seq.
Protecting Interests of Plan Participants and
Beneficiaries
Broad preemption of any state law that “relates” to
employee benefit plan
Federal court jurisdiction to enforce ERISA
violations, plus attorney’s fees to prevailing parties
3. Consolidated Omnibus Budget Reconciliation Act
of 1985 (COBRA)
Health Insurance Portability and Accountability Act
(HIPAA) of 1996
Genetic Information Nondiscrimination Act of 2008
(GINA)
Patient Protection and Affordable Care Act of
2010 (PPACA or ACA or Obamacare)
4. Plan, fund or program
• Established by an employer, employee
organization, or both
• To provide welfare or pension benefits
• For employee participants or their beneficiaries
ERISA, §3(1), (2)(A), 29 U.S.C. §1002(1), (2)(A)
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5. •
Pension Plans
– Exceptions:
• Bonus programs
• Group IRAs
• Salary reduction plans under §403(B)
• Top Hat Plans
• Excess Benefit Plans
• Code Section 457 and 409A Plans
• Governmental Plans
6.
Welfare Plans
◦ Exceptions:
Wage payments for medical and other reasons
Maintenance of recreation, dining, or first aid facilities
Holiday gifts
Remembrance funds
Voluntary group insurance program
Scholarship programs
7.
Plan Administrator
◦ Person specifically designated in plan document
◦ If no so designated, plan sponsor is administrator
◦ Must provide plan documents upon request
Plan Sponsor
Plan Fiduciary
Plan Participant and Beneficiary
8. No formal writing, notice or reporting required
Employer’s intent is not relevant
Employer cannot opt out by non-compliance
Employer does not need to be involved in
administration
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Plan must be established and maintained in
writing [29 U.S. C. §1102(a)(1)]
Writing may consist of multiple documents
Must authorize person and establish procedure to
amend plan
Must provide procedure for establishing funding
policy
Must specify how payments are made to and by
plan
10. •
Form 5500
– Annual report filed by plan administrator
– Exceptions:
• Insured or unfunded welfare plan with fewer than 100 participants
• Certain group insurance arrangements
• Top Hat Plans
– Penalties:
• $25 for each day report is unfiled (up to $15,000)
• Secretary of Labor can assess civil penalty of up to $1,100 per day
• Delinquent Filer Voluntary Compliance Program
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Summary Plan Description (SPD)
Summary Annual Report (SAR)
Summary of Material Modification (SMM)
Summary of Benefits and Coverage (SBC)
11. Written summary for each employee benefit plan
covered by ERISA
Must be written in manner understood by average
plan participant
Must be furnished to participants within 90 days of
becoming a participant (or to beneficiary within 90
days of first receipt of benefits)
Updated SPD must be provided every 5 years if
amendments (or 10 years if no changes)
12. Summary Annual Report (SAR) must be provided
to participants and beneficiaries
Exemption for small insured or unfunded welfare
and top hat plans
Deadline is 9 months after plan year close
Participant, beneficiary, fiduciary or DOL can bring
suit to enforce
Criminal and civil penalties for violations
13. SMM must be distributed when material
modification of plan terms occurs
Recipients: Participants and beneficiaries
receiving benefits
Must be calculated to be understood by average
plan participant
Must be provided no later than 210 days after plan
year ends
14. Group health plans and health insurers must
provide 4-page summary of benefits/coverage
Must be provided at application/enrollment
Notice of material modifications must be given 60
days prior to effective date
Must use standard definitions and terms as
developed by Department of Labor
15. Under prior law, no requirement to provide health
care benefits
ACA requires large employers (inc. nonprofits) to
provide affordable and minimum health care to
full-time employees or pay penalties
Imposes requirements on small employers
Allows whistleblower claims under ACA
procedures
16. 50 or more full-time employees (including
equivalents)
Full-time = 30 or more hours per week or 130
hours per month
Affiliated companies are combined
Special rules for seasonal and salaried employees
who don’t keep track of their time
17. Employer Mandate – Postponed to 1-1-15
Plan must be “affordable”
◦ May not cost more than 9.5% of household income
Must provide “minimum value”
◦ Must pay out 60% or more of benefit costs incurred by
plan
Employer Shared Responsibility Payments
18.
If no coverage is provided by employer
◦ $2,000 penalty multiplied by all full-time employees
(excluding first 30) if one employee receives a federal
subsidy via health marketplace
◦ Ex: Employer has 130 employees; annual penalty is
$200,000
If coverage is “unaffordable”
◦ $3,000 multiplied by number of full-time employees
receiving federal subsidies
19. Employers, including small employers, required to
send notice of health insurance marketplace by
October 1, 2013
For new employees, notice must be sent within 14
days of hire
Must advise employees of marketplace and
employer’s health benefits plan if any
Model notices posted on DOL website
20.
Whistleblower Protections and Claim Procedure
◦ No employer may discharge or discriminate against
employee:
Who receives an ACA credit or subsidy or
Who reports an ACA violation to the employer or
government agency or testifies in proceeding
◦ Employee has 180 days after adverse action to file
complaint with OSHA
21. OSHA will investigate and can order interim
reinstatement for “reasonable cause”
OSHA must provide findings and either party may
object and request hearing
OSHA must issue final order within 120 days
If no decision issued in 210 days of complaint
filing, complainant may sue in U.S. District Court
and ask for jury trial
22. Complainants need to show adverse action was
“contributing factor”
Burden shifts to employer to show by clear and
convincing evidence that same action would have
resulted absent protected activity
ERISA §510 also bars interference with employee
benefits
Rehire, back pay & attorneys’ fees available
23. Investigation starts with letter or phone call
EBSA is assigned to enforce ERISA
DOL/EBSA can issue subpoenas, compel
witnesses to testify under oath
“Voluntary compliance”
Remedies: Fines, civil lawsuits, criminal penalities
24. Windsor: Section 3 of DOMA defining “spouse”
and “marriage” to exclude same sex is
unconstitutional
DOL TR 2013-04 (09-18-2013)
◦ Under ERISA, “state of celebration” rule governs
Effects
◦ Health plan premium for same sex spouse is not taxable
◦ Marriage “penalty” now applies
