ERISA Reporting and
Disclosure
Chapter 12
Employee Benefit & Retirement Planning
What is it?
• Employee Retirement Income Security Act of 1974—
broad legislation governing requirements for
employee benefit and retirement plans
• ERISA includes broad reporting and disclosure
requirements for many plans
• Divides plans into 2 types: pension plans and welfare
plans
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ERISA Reporting and
Disclosure
Chapter 12
Employee Benefit & Retirement Planning
Plans Exempt from ERISA
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Government plans
Church plans
Plans outside U.S.
Unfunded excess benefit plans
Plans maintained solely to comply with workers
compensation, unemployment compensation and
disability insurance laws
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ERISA Reporting and
Disclosure
Chapter 12
Employee Benefit & Retirement Planning
“Pension Plan” under ERISA
• Much broader term under ERISA than under Internal
Revenue Code
• Means any plan, fund or program of employer,
employee organization (e.g., union) or both, that:
– Provides retirement income to employees, or
– Results in deferral of income by employees for periods
extending to termination of employment or beyond
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ERISA Reporting and
Disclosure
Chapter 12
Employee Benefit & Retirement Planning
“Pension Plan” under ERISA
• ERISA definition includes all qualified pensions and
profit sharing plans; also includes some nonqualified
deferred compensation plans
• ERISA pension plan generally is any employee
benefit plan that involves deferral of an employee’s
compensation to retirement or later date
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ERISA Reporting and
Disclosure
Chapter 12
Employee Benefit & Retirement Planning
Regulatory Exemptions
Labor regulations give partial exemptions or special
treatment from ERISA requirements for:
Severance pay plans if
1) Payments do not depend directly or indirectly on the
employee’s retiring
2) Total payments under the plan do not exceed twice the
employee’s total annual compensation during the year
immediately preceding the separation from service
3) All payments to the employee are completed within 24
months of separation from service.
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ERISA Reporting and
Disclosure
Chapter 12
Employee Benefit & Retirement Planning
Regulatory Exemptions
Plans complying with requirements are exempted from
reporting and disclosure requirements for pensions, but
may be subject to more limited requirements for welfare
benefits.
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ERISA Reporting and
Disclosure
Chapter 12
Employee Benefit & Retirement Planning
Regulatory Exemptions
• Labor regulations also give partial exemptions or
special treatment from ERISA requirements for:
– Supplemental payment plans that provide extra benefits to
retirees to counteract inflation, and
– Employer-facilitated IRAs (such as SEPs and SIMPLE IRAs)
and Section 403(b) tax sheltered annuities
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ERISA Reporting and
Disclosure
Chapter 12
Employee Benefit & Retirement Planning
Pension Plan Reporting and Disclosure
• Reporting and disclosure requirements:
– Applicable to all pension plans (all qualified plans and some
nonqualified)
– Timing, description and details are included in compliance
chart at Figure 11.1 (pages 115-119)
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ERISA Reporting and
Disclosure
Chapter 12
Employee Benefit & Retirement Planning
Pension Plan Reporting and Disclosure
Most important reporting and disclosure requirements:
1) Summary Plan Description (SPD): must be provided to
participants within 120 days after plan established or 90
days after participant enters plan. Provides description of
major plan provisions.
2) Annual Report (Form 5500 Series) Must be filed with IRS
each year by end of seventh month after plan year ends.
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ERISA Reporting and
Disclosure
Chapter 12
Employee Benefit & Retirement Planning
Pension Plan Reporting and Disclosure
Most important reporting and disclosure requirements:
3) Summary Annual Report. Must be provided to participants
each year within nine months after end of plan year;
provides information from annual report.
4) Individual Accrued Benefit Statement
Must be made available to participants within 30 days of
request, and only once per year. Good practice to offer
to all participants since it communicates value of plan
benefits.
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ERISA Reporting and
Disclosure
Chapter 12
Employee Benefit & Retirement Planning
Title IV Reporting and Disclosure Requirements
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Title IV of ERISA contains plan termination
insurance provisions
•
Imposes various reporting and disclosure
requirements on defined benefit pensions
•
Reporting and disclosure provisions help the
Pension Benefit Guaranty Corporation insure and
protect benefits
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ERISA Reporting and
Disclosure
Chapter 12
Employee Benefit & Retirement Planning
“Welfare Plans” under ERISA
•
Any plan, fund or program established or maintained
by and employer, employee organization, or both
providing one of the following either through
insurance or otherwise:
– Medical, surgical, hospital care
– Sickness, accident, disability benefits
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ERISA Reporting and
Disclosure
Chapter 12
Employee Benefit & Retirement Planning
“Welfare Plans” under ERISA (continued)
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Any plan, fund or program established or maintained
by and employer, employee organization, or both
providing one of the following either through
insurance or otherwise:
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Apprenticeship or other training
Day care centers
Scholarship funds
Prepaid legal services
Certain other plans described in federal labor law
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ERISA Reporting and
Disclosure
Chapter 12
Employee Benefit & Retirement Planning
Regulatory Exemptions: Welfare Plans
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Labor Regulations make certain practices and
benefits exempt from ERISA reporting and
disclosure:
– Overtime, shift pay and holiday premiums
– Sick pay, vacation pay, holidays, military and jury duty,
sabbatical paid out of general assets of the employer (i.e.,
not funded in advance)
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ERISA Reporting and
Disclosure
Chapter 12
Employee Benefit & Retirement Planning
Regulatory Exemptions: Welfare Plans
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Practices and benefits exempt from ERISA reporting
and disclosure:
Recreational or dining facilities or first aid centers on
employer’s premises
Holiday gifts
Voluntary group insurance offered by an insurer, not
sponsored by employer
Unfunded tuition reimbursement
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ERISA Reporting and
Disclosure
Chapter 12
Employee Benefit & Retirement Planning
Welfare Plan Reporting and Disclosure
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Reporting and disclosure requirements less onerous
for welfare plans than for pension plans.
Small welfare plan exemption: no Form 5500 annual
report filing requirement if welfare plan has fewer
than 100 participants and is fully insured or is paid
out of general assets on a “pay as you go” basis.
– Plans satisfying small welfare plan exemption also do not
need to file a Summary Plan Description.
– Many forms may be obtained at IRS website www.irs.gov
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