Are Group Health Plans Subject to ERISA?

Group health plans are almost always subject to the Employee Retirement Income Security Act of 1974, also known as ERISA.

This means employers must follow certain rules, such as:

• Provide participants with important information in writing about plan features and funding.
• Establish an appeals and grievance process for participants to receive benefits from the plan.
• Provide fiduciary responsibilities for those who manage and control plan assets.
• Give participants the right to sue for benefits and breaches of fiduciary responsibility.

There are three instances when a group health plan would not be subject to ERISA:

1. The group health plan is a church plan, which means it must be maintained by a church or convention of churches that are exempt from taxes under IRS Code Section 50 For example, a Catholic church that provides a group health plan to its priests will be exempt from ERISA. It should be noted that organizations who affiliate themselves with a religion are generally still subject to ERISA. Examples are universities or hospitals who are affiliated with a religion.
2. The group health plan is a governmental plan, which is a plan established or maintained for employees of a government or governmental agency. For example, a group health plan established for employees of a township, city or state will be exempt from ERISA. However, in some instances, a governmental plan could lose its exemption status if any private sector employees can participate in the plan.
3. The group health plan is considered voluntary, which means:

• there are no employer contributions,
• the employer does not endorse the plan,
• the employer receives no financial consideration or other benefit by offering the plan,
• and enrollment in the plan is completely voluntary.

It can be easy for a plan that seems like it’s voluntary to be viewed as nonvoluntary, so it’s hard to qualify for this exemption. The exemption may cease to apply if an employer negotiates terms of coverage, associates its name with a plan, recommends a plan, assists with claims or disputes, or allows premiums to be paid through a Cafeteria Plan.

The bottom line is that most group health plans are subject to ERISA. Other employer-sponsored plans such as dental, vision, life, disability, Health FSAs and HRAs are also subject to ERISA in most instances.

The easiest way for an employer to start complying with the requirements of ERISA is by preparing a written document, often referred to as a Wrap Document, which provides participants with the important plan information they’re supposed to receive in writing.