Many midsize employers believe that self insurance is full of rules and redtape that fully insured plans don’t have. However, that’snot necessarily the case. Compliance is integral to self insurance and there are several items that you are responsible for as a self-funded employer, including:
- • ERISA fiduciary responsibilities,
- • Non-discrimination rules,
- • Reporting and disclosure,
- • Requirements notices,
- • Planned document requirements,
- • ACA penalties, and
- • Disclosure statements for stop-loss.
A solid plan document and a high-quality TPA will take care of just about all these items and let you just work from a checklist; so, while it seems like a lot of work, it’s not a lot to do on your end.
Fully insured plans have the same rules; you just sign off on it a bit differently than when you are self-insured.
There is one item however that you are responsible for -even in a fully insured plan -but the responsibility looks different. And it is rarely talked about.
I’m referring to the ERISA fiduciary responsibility. ERISA guides all plans, whether they are fully insured or self-funded, with the exception of church and governmental plans. Even if you’re fully insured, your plan is still governed by ERISA, and the responsibility still comes back to you.
The fact is, you cannot escape fiduciary responsibility as long as you accept employee contributions into your plan; it’s just not possible. Again, a solid plan document managed by a high-quality TPA will limit your exposure. If you’re concerned about your fiduciary responsibility or if you haven’t been briefed about fiduciary responsibility, feel free to reach out to me or read further on plan documents.
KEY: The plan sponsor or plan administrator has full fiduciary responsibility.
There’s not really much difference between a plan administrator and plan sponsor if you’re self-insured. If you are an individual, group of individuals, or a corporation named in the plan document as responsible for plan duties, you are the plan administrator. If no plan administrator is specifically named the plan sponsor, then the employer is the plan sponsor. Or, an employee organization, such as a union can be a plan sponsor. A Joint Board of Trustees or an entity representing parties establishing or maintaining the plan can also be a plan sponsor.
Under ERISA, a fiduciary is anyone who exercises discretionary authority or control over managing the plan and the plan assets. If you manage plan assets you’re also a fiduciary. You may just manage the assets and not manage the plan. The bottom line is that the named fiduciary is an individual with authority to control and manage the operational and administrative needs of the plan and is named in the document. It’s important to note, however, that if you are the named fiduciary or if you are the fiduciary and your plan is found to be in violation, you are personally responsible.
Although fiduciary requirements appear to be quite simple, they are actually horribly complex; the devil is always in the detail. Fiduciary requirements state that you must act solely in the interest of the employees for the exclusive purpose of providing benefits or defraying reasonable expenses of plan administration. That means, if you are self-insured you are on the hook for reasonable expenses of planned administration. If you are fully insured, you are still on the hook! You must act with care, skill, prudence, and diligence that a similarly situated prudent person would. And finally, you must act in accordance with documents or instruments governing the plan document, summary plan, and document rules if you are the fiduciary of the plan.
Do you remember all those 401k lawsuits that happened a few years ago when employee groups brought class action lawsuits against employers for offering 401k plans with excessive fees? Those are the same provisions in ERISA that you as the fiduciary of the health insurance plan are responsible for. You must follow reasonable fees for both services and plan administration. The next wave of lawsuits will undoubtedly be in the health insurance and health and welfare plans.