Does My Organization Need to Comply With ERISA? (and 5 Other ERISA FAQs)

Have you ever heard of the Employee Benefits Security Administration (or tried to say its name three times fast?). It’s an agency within the Department of Labor and is just one of the several government organizations business owners must be aware of.

That’s because it oversees the Employee Retirement Income Security Act of 1974 (ERISA). 

If you’re opening a business or expanding your company’s benefit offerings, it’s critical that you check if you need to comply with ERISA. 

What is ERISA?

ERISA was passed in 1974 to regulate pension benefit and welfare benefit plans. Its primary focal point was establishing minimum standards and protections for individuals in these retirement and health plans. 

ERISA also requires that participants and beneficiaries receive proper notice and disclosure of the benefits that their employer provides.

Primary responsibilities for employers to comply with ERISA include three important items:

1. Detailed disclosure to covered individuals (plan participants and beneficiaries).
2. A strict fiduciary code of conduct for plan sponsors.
3. Detailed reporting through Form 5500, as applicable.

Looking for ERISA compliance deadlines and common mistakes? Check out our content here. 

What Types of Employers Must Comply with ERISA?

If an employer is offering a benefit plan that is for the purpose of providing one or more benefits listed in ERISA to employees and beneficiaries (e.g., medical, surgical, or hospital care), then generally, that employer needs to comply with ERISA.

A common rule of thumb is any employer that offers a group-sponsored health plan must comply with the ERISA notice and disclosure, and possibly, reporting requirements unless an exemption applies.

Examples of benefits that are subject to ERISA include group medical, dental and vision. They can also include life/AD&D, short-term and long-term disability, health flexible spending accounts, and health reimbursement arrangements.

When Would ERISA Not Apply?

Exemptions to ERISA apply to organizations such as churches and government entities, and include plans maintained to comply with workers’ compensation or certain disability plans that fall under a statutory exemption status.  

ERISA does not apply to those exempt organizations and to employers that do not offer a benefit identified under ERISA that is for the benefit of their employees and beneficiaries.  

An example might be a municipality that offers a medical plan to their employees. The municipality would not need to comply with ERISA’s requirements.  

How Does ERISA Affect Small Businesses?

ERISA’s requirements apply to both small and large employers alike. For example, whether you have two employees or 200, you’re responsible for providing proper disclosures and meeting fiduciary obligations under ERISA.

Reporting requirements vary based on plan size and structure:

• Employers with 100 or more plan participants (not just employees) at the start of the plan year generally must file Form 5500.
• Smaller employers may also be required to file if their plan is funded through a trust, is a multiple employer welfare arrangement (MEWA), or otherwise does not qualify for the small-plan exemption.

What Do Small Employers Need to Stay Compliant?

Here is a current checklist for small employers to ensure compliance with ERISA:

• Plan document: Do you have an ERISA-compliant plan document (standalone or “wrap”)?
• Summary Plan Description (SPD) distribution: Have you distributed SPDs within 90 days of coverage for new participants, and within 120 days after a new plan first becomes subject to ERISA?
• Summary of material modifications (SMMs): Have you issued SMMs within 210 days after the end of the plan year in which a change was adopted?
• Form 5500: If required, have you filed timely annual reports?
• Eligibility rules: Are your eligibility and plan provisions updated to align with current Healthcare Reform, COBRA, and other regulations?

Tip: For a more extensive checklist, download our free ERISA Compliance Checklist to ensure you’re meeting requirements. 

What are Common Penalties for Noncompliance for Small Businesses?

While all companies want to avoid paying penalty fees, small businesses with tighter purse strings must be especially careful of rules and deadlines. 

By not adhering to ERISA requirements, businesses open themselves up to costly fines every day they’re not compliant. Some of these penalties include:

• Failure to provide an SPD to participants: If a participant or beneficiary makes a written request for a SPD and you fail to provide it, a court may impose penalties of up to $110 per day until the SPD is furnished.
• Failure to provide documents to the DOL upon request: If the Department of Labor requests plan documents during an investigation or audit and you fail to provide them, penalties can be assessed at $195 per day, up to a maximum of $1,956 per request.
• Failure to file form 5500: Late or missing Form 5500 filings can cost an employer up to $2,739 per day, with no prescribed maximum .
• Failure to provide a summary of benefits and coverage (SBC): While technically an ACA requirement, employers often confuse the SBC with ERISA’s SPD. Failure to provide an SBC when required can result in penalties of up to $1,443 per failure.

Common Mistake Alert: Many small businesses mistakenly assume the insurance certificate or carrier’s benefit summary satisfies ERISA’s SPD requirement. It does not. Employers must prepare and distribute their own SPD or use a wrap document to remain compliant.

The Bottom Line: Stay Confident, Stay Compliant

ERISA compliance isn’t just for big corporations; it’s a responsibility for most employers offering benefits. Luckily, with the right processes and partners, it’s easier than you might think.

Whether you’re filing a Form 5500, updating your plan documents, or simply ensuring your employees have the right disclosures, the key is staying proactive and partnering with the right team to navigate regulations and support your people.