6.2 Flashcards
The Employment Retirement Income Security Act (ERISA) was enacted by Congress in 1974 as a result of increased awareness towards ______. Before ERISA, employers had little incentive for providing welfare benefits to employees, and if provided, company welfare plans were often vulnerable to ______ and abuse due to a lack of disclosure and adequate safeguards concerning their operation.
employee benefits in the workplace and the lack of regulation over employer-sponsored welfare plans
funding mismanagement
Commonly referred to as ERISA, this federal law established minimum guidelines pertaining to the administration of employer-based pension plans and employee welfare benefit plans such as life, health and disability insurance. The overall purpose of the law is to ______ and their beneficiaries from unethical or unlawful practices in regards to the funding, management and distribution of employee retirement and insurance benefits.
protect participating employees
ERISA is regulated by the ______ and is administered and enforced through the department’s Employee Benefits Security Administration. ERISA regulation applies to all ______ who offer employee benefit plans. Government employees as well as religious organizations are exempt from ERISA rules, as are individuals who purchase private individual retirement and insurance plans.
Department of Labor
non-governmental, private employer-groups in the U.S.
It is important to note that ERISA does not ‘preempt,’ or supersede ______, as the states ultimately regulate insurance; however, since employer-sponsored plans involve interstate commerce, such plans also fall under federal jurisdiction for federal taxation purposes because they substantially affect the revenues of the United States due to the preferential Federal tax treatment provided to such plans.
state insurance laws
ERISA regulation does not pertain to the types and levels of plan benefits, nor does it mandate that groups establish pension or insurance plans; however, for those groups that do establish such plans, ERISA regulation pertains to the administration of the group’s benefit plan in ______ to ensure it benefits the members of the group for which it was established.
how it is managed
ERISA mandates the ______, benefits provided under the plan and the limitations of the plan to participating employees by the employer or other group sponsor through a ______, in addition to any policy summary provided by the insurer.
reporting and disclosure of plan eligibility
Summary Plan Description (SPD)
Under ERISA, the group’s sponsor has the ______ to act in the best interests of the plan’s participants and to ensure proper participation and vesting standards are met. It is the responsibility of the plan sponsor to ensure ______ to ensure proper collection of plan funds, as well as distribution and claims processes to avoid discrimination within the group.
fiduciary responsibility
safeguards are in place
As part of the Civil Rights Act, the Age Discrimination in Employment Act (ADEA) was enacted by Congress in 1967 primarily to ______ by employers based on the age of an employee.
prohibit the practice of forced retirement
Under the ADEA, employers are required to provide equal benefits for older employees as it does for younger employees, or to provide an ______ for both younger and older employees.
equal defined contribution amount
Under the ______ rule, older employees must receive the same benefit levels in life and disability coverage as younger employees; however, under the ‘equal costs’ rule, an employer can ______ an older employee’s benefits to maintain the same cost of coverage as the employer provides for younger employees. Older employees may also need to ______ due to the defined contribution made by the employer and the increase in the cost of the plan as the employee ages.
‘equal benefits’
limit or reduce
contribute more towards their retirement plan
Regardless of any reductions in life or disability insurance, employers must maintain medical coverage on older employees the same as it covers younger employees, regardless of the ______.
increase in cost to the employer.
Enacted in 1982, the Tax Equity and Fiscal Responsibility Act (TEFRA) expanded on the ADEA by requiring an employer to ______. Similar to the ADEA, this federal law applies to employer groups of ______.
maintain group health coverage once an employee becomes eligible for Medicare
20 or more employees.
Under TEFRA, an employee who is over the age of 65 and actively working, as well as his or her spouse, must be allowed to ______, with Medicare being secondary.
maintain group health coverage as his or her primary health coverage
Non-discrimination rules established through TEFRA further prohibit eligibility to participate in a group plan to only ______. Benefits provided to highly compensated key employees cannot exceed ______ of all benefits provided to the entire group.
highly-compensated key employees such as officers, shareholders or executives
25%
Under ERISA, the plan sponsor must establish a ______, whether purchased by an insurer or self-insured by the sponsor itself, the sponsor is ultimately responsible for providing such disclosures to members of the group, and is held accountable for ERISA compliance. While state laws mandate insurer disclosure, ERISA mandates ______, in addition to material provided by the insurer.
written policy
employer disclosure
