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990 Hammond Drive, Suite 800, Atlanta, Ga., 30328toll free: 866-488-6562, local 678-443-4003

www.erisapros.com

ERISA COMPLIANT HEALTH & WELFARE PLAN DOCUMENTS

Wrap-TightSM Plan Documents ● Summary Plan Descriptions (SPD) ● Form 5500s ● Summary of Material Modifications (SMM) ● Summary Annual Reports (SAR)

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SHINY STUDEBAKER

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RUSTY STUDEBAKER

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Health Plans & BenefitsThe Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for most voluntarily established pension and health plans in private industry to provide protection for p p y p pindividuals in these plans.ERISA requires plans to provide participants with plan information including important information about plan features and funding; provides fiduciary responsibilities for those who manage and control plan assets; requires plans to establish a…

Fiduciary ResponsibilitiesFiduciaries who do not follow these principles of conduct may be personally liable to restore any losses to the plan, or to restore any profits made through improper plan, or to restore any profits made through improper use of plan assets. Courts may take whatever action is appropriate against fiduciaries who breach their duties under ERISA.

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OBAMA

The selection earned praise from the AFL CIO andthe AFL-CIO and other labor organizations, and dismay from b i

HILDA

business groups.

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Change?HILDA

You better believe it!

What is the Rate of Compliance?

• 55% of Employers >100 Employees Are Out of Compliance for not Filing Form 5500

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Why is Compliance So Low?

• Lack of awareness

• Certificates of Coverage/Insurance are often thought to be SPDsare often thought to be SPDs

Why Such a Low Rate of Compliance? (Cont.)

– Some are aware, but choose to ignore problem

– Others procrastinate

Regardless of the reason, compliance is not optional—it’s the law!

When there is a problem, or the DOL knocks on your door—it’s too late.

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Government Penalties for Not FilingGovernment Penalties for Not Filing Form 5500

$1,100/day for not filing Form 5500 within

7 months after the end of Plan Year

Just 2 months late on 4 Plans can add up to $264,000!

ERISA Enforcement Nets $1.2 Billion!

2008 Results - $1.2 Billion from:• 175,000 Individual Complaints

• 3,570 Civil Investigations

• 205 Cases Referred for Litigation

• 101 Criminal Indictments

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DOL Penalties

Failure to distribute SPD requested by participant1— $23,850

Failure to file Form 55002 —

1 Scarso v. Briks, 909 F. Supp. 211 (S. D. NY 1995)2 PWBA v. Compgraphix, Inc., 199-RIS-52 (ALJ Oct. 14, 1999)

$50,000

Court Cases

Claim denied as experimental3Claim denied as experimental3 —

Bad faith claim denial4 —

$5,000,000

$8,692,000

3 Fox v. HealthNet, 1993 Westlaw 794305 (Riverside County Super. Ct/Central Cal.Dec. 23, 1993). Jury awarded $89 million in damages ($77 million of which was for punitive damages) The case was later settled for $5 million.

4 Fisher v. Aetna, No. 3AN97-291, Alaska Super., 3rd Jud. Dist 1998). State court, jury trial, non-ERISA. $156,000 for future economic loss, $136,000 for emotional distress and $8.4 million for punitive damages

$8,692,000

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Welfare Benefit Plans Subject to ERISA

• Medical, Hospital, Surgical, & HMO Plans

• Dental Plans

• Vision Plans

• Prescription Drug Plans

• Health FSAs

Welfare Benefit Plans Subject to ERISA(Continued)

• Life Insurance

• Disability Insurance Plans

• Severance Pay Plans

• HRAs (Health Reimbursement Accounts)

• Employee Assistance Plans

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Welfare Benefit Plans Subject to ERISA(Continued)

• Unemployment Benefit Plans• Vacation Plans

• Holiday Plans

• Housing Assistance Plans

• 419A(f)(6) and 419(e) Plans

Welfare Benefit Plans Subject to ERISA(Continued)

• Daycare Assistance Plans

• Business Travel Accident Plans

• Prepaid Legal Services• Scholarship Plans• Apprenticeship/Training Plans

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Required ERISA Documents and Forms

• Written Plan Document for each Plan

• Summary Plan Description (SPD)

• Annual Form 5500 (>100 Participants)

• Summary of Material Modification (SMM)

• Summary Annual Report (SAR)

SPD Requirements Often Not Contained In Certificate of Coverage

• Plan Sponsor’s TIN• Plan Administrator’s name, address, & phone #• Plan number for Form 5500, e.g., 501, 502,…• Plan Year• Agent for service of legal processg g p• Plan eligibility and entry dates• Cost sharing of the Plan with employees• Plan amendment and termination rights• Insurer refund allocation policy

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SPD Requirements Often

Not Contained In Certificate of Coverageg

Actual Template Language

“Eligibility for benefits under the Subsidiary Contracts shall be determined by the Subsidiary Contracts.”y y

“This template does not attempt to describe eligibility provisions.”

SPD Requirements Often Not Contained In Certificate of Coverage

• Plan Sponsor’s TIN• Plan Administrator’s name, address, & phone #• Plan number for Form 5500, e.g., 501, 502,…• Plan Year (not the same as policy anniversary)• Agent for service of legal process• Plan eligibility and entry dates• Cost sharing of the Plan with employees• Plan amendment and termination rights

• Insurer refund allocation policy (necessary for <100 Form 5500 exemption)

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Required ERISA Documents and Forms

• Annual Form 5500 <100 Participants

– Small employer exemption if SPD contains a “Refund Allocation Policy.”Refund Allocation Policy.

– If employer does not have an SPD, it loses the exemption and must file a Form 5500.

ERISA Algebra

Plan Document

+ Summary Plan Description

Master Contract

+ Certificate of Coverage

+ Summary of Benefits≠

p Summary of Benefits

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PROBLEMS of NON-COMPLIANCE

L it b t i d St t t• Lawsuits can be tried State court.

– Jury trial

– Punitive damagesPunitive damages

– de novo review

Benefits of Being in Compliance

• Lawsuits tried in Federal court, rather than State court.

• Time & cost savings from overall reduced• Time & cost savings from overall reduced litigation

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Benefits of Being in Compliance (Cont.)

• Enhanced ability to amend or terminate Plan

• Avoid personal liability as Fiduciary for not following Plan Document

• Avoid criminal charges for willful noncompliance

What’s New - Looking Ahead to 2010What s New Looking Ahead to 2010

Form 5500 Electronic Filing

DOL’s primary enforcement tool– DOL s primary enforcement tool

– Automated auditing capability

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What’s New - Looking Ahead to 2010 g(continued)

– Increased enforcement

• 1,000 New Employees, including

• 670 Investigators

ERISA Pros Solutions

Fact finding inter ie• Fact finding interview

• Wrap-TightSM Plan Document

• Wrap-TightSM SPD• Board of Directors Resolution

Summary of Material Modification (SMM)• Summary of Material Modification (SMM)• Form 5500 Filing• Late Filer Voluntary Compliance Program

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ERISA Pros Solutions (Cont.)

• Summary Annual Report (SAR)

• ERISA Guide

• Installation interview

• Interim consultationsInterim consultations

• Offsite document storage

• Annual review and updates

Employer’s

$1,100

Employer s Daily Gamble

2¢/employee(for 100 employees)

vs.

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Benefits to Brokers

E h l ti hi• Enhance relationships

• Value added service

• Avoid misunderstandings

• Improve retention

• Unique prospecting approach

• Partnering with ERISA Pros

Using ERISA Compliance to

Protect and Expand Your Existing ClienteleProtect and Expand Your Existing Clientele

• FreeERISA.com– Employers filing multiple 5500s

Employers filing 5500 for pension plan but not for– Employers filing 5500 for pension plan but not for Welfare Benefit Plan

– Employers that have skipped 5500 filing for some years

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Using ERISA Compliance to

Protect and Expand Your Existing ClienteleProtect and Expand Your Existing Clientele (continued)

• Sample Approaches for Prospects

• Compliance Checklist for Employers

• What to Say to Existing Clients

Important Disclaimer

This presentation is an overview of general information related to ERISA, as itapplies to Welfare Benefit Plans only. Welfare Benefit Plans are also regulated bythe IRS, but the tax issues of these Plans are not addressed here. The provisionsof ERISA are complex, confusing, and constantly changing. An employer’scircumstances its benefit plans and the provisions of its plans may also changecircumstances, its benefit plans, and the provisions of its plans may also changeover time. ERISA Pros, LLC is not engaged in rendering legal advice. WelfareBenefit Plans are frequently unique and require individualized attention. Forinformation upon which you may rely, you must seek expert legal advice from acompetent professional relating to the applicability of ERISA to your particularfacts and circumstances.

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990 Hammond Drive, Suite 800, Atlanta, Ga., 30328toll free: 866-488-6562, local 678-443-4003

www.erisapros.com

ERISA COMPLIANT HEALTH & WELFARE PLAN DOCUMENTS

Wrap-TightSM Plan Documents ● Summary Plan Descriptions (SPD) ● Form 5500s ● Summary of Material Modifications (SMM) ● Summary Annual Reports (SAR)