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Ways to avoid invoking ERISA


Some employers will go to great lengths to ensure that a new voluntary benefit program is not governed by the Employee Retirement Income Security Act--only to have it all come tumbling down when a high-level executive announces the program's availability over the company intercom system.

"Someone could consider an e-mail that lets employees know about the availability of the benefit as an endorsement, or even the fact that an employer has negotiated a group rate," said Mary Ericson, assistant vp of regional accounts and consumer segment leader at Hartford Life Insurance Co. in Simsbury, Conn.

"It would be OK to announce the program, but if you put the company logo on booklets, or tell people that the president is very excited about the program and they want employees to consider it," it could be considered a company endorsement, thereby making the benefit subject to ERISA, said Mark Holloway, a senior vp at Aon Consulting in Winston-Salem, N.C.

He added that voluntary benefit plans may be deemed under ERISA jurisdiction if employees are permitted to pay premiums for them on a pretax basis via Section 125 of the Internal Revenue Code.

"Some people believe pretax payments can be exempt from ERISA, but that's a controversial position," said Henry Saveth, an attorney at Mercer Human Resource Consulting in New York.

However, he said the U.S. Labor Department has yet to rule on such situations.

The following are so-called "safe harbors" that employers can use to ensure the voluntary benefit plans they offer are exempt from ERISA:

  • No contributions are made by an employer.

  • Participation is completely voluntary.

  • The sole employer program functions are, without endorsing the program, to permit the insurer to publicize the program to employees or members, to collect premiums through payroll deductions and to remit them to the insurer.

  • The employer receives no consideration other than reasonable compensation, excluding any profit, for administrative services actually rendered in connection with payroll deductions for the program.