What Are the Latest Amendments to ERISA?

The Employee Retirement Income Security Act (ERISA), enacted in 1974, outlines the rules for handling employee benefit plans. This law ensures that insurance companies and private employers follow certain guidelines. It also provides crucial protections for plan participants.

Over the years, ERISA has undergone amendments to meet changing healthcare needs. This article looks at the key amendments that influenced welfare benefit plans for employees and their beneficiaries.

What is ERISA?

The Employee Retirement Income Security Act of 1974 (ERISA) established the minimum standards for most health benefits and private-sector qualified retirement plans. The law aims to protect participants who have voluntarily created ERISA plans.

This federal law mandates necessary disclosure requirements, which include the following:

• Summary plan descriptions containing important details about their funding and features. This includes disclosure of deductibles, premiums, and copays
• Baseline standards for participation, vesting, financial contribution, and benefit accrual
• Fiduciary responsibilities for those managing and controlling plan assets
• Required mechanisms for appeals and grievance process
• Authority granted to participants to prosecute for breaches of fiduciary duty and benefits

ERISA also ensures payment of certain benefits through the Pension Benefit Guaranty Corporation (PBGC). The PBGC is a government-owned agency. It ensures that plan participants do not lose their retirement benefits upon termination of the pension plan.

Amendments to ERISA

The federal government continues to amend ERISA to expand its protections for members and beneficiaries. It also aims to enhance recordkeeping for such plans.

One key amendment is the Consolidated Omnibus Budget Reconciliation Act (COBRA). COBRA allows workers and their families to extend their health coverage benefits temporarily. This continued coverage applies after qualifying events, including job loss.

Another important amendment is the Health Insurance Portability and Accountability Act (HIPAA). HIPAA protects workers and their families against discrimination based on health-related factors.

There are also significant amendments under the following laws:

• Newborns and Mothers' Health Protection Act
• Mental Health Parity and Addiction Equity Act
• Women's Health and Cancer Rights Act
• Affordable Care Act

You can learn more about each of these laws below. 

Consolidated Omnibus Budget Reconciliation Act (COBRA)

Congress enacted the Consolidated Omnibus Budget Reconciliation Act (COBRA) in 1985. Before this amendment, someone whose job was terminated would no longer have health insurance coverage.

Through COBRA, employees can continue their welfare benefit plans for a certain period. This option is available to qualifying people who lose their jobs for any other reason besides "gross misconduct."

To qualify for COBRA:

• The individual must have had healthcare coverage before changing employment status. They can either be an employee, an employee's spouse, or an employee's dependent child.
• There must have been a "qualifying event" which caused them to lose their welfare benefit coverage.

If a former employee or his or her spouse purchases COBRA coverage, it will be out of their own expenses. COBRA coverage begins on the first day of termination. It lasts 18 months for the employee and may last longer for an employee's spouse and dependent child. The period of coverage may depend on the qualifying event or other circumstances.

Learn more about COBRA insurance coverage in this article.

Health Insurance Portability and Accountability Act (HIPAA)

In 1996, the Health Insurance Portability and Accountability Act (HIPAA) was added as an ERISA Amendment. It aims to make healthcare coverage more secure for employees and their dependents. One way it does so is by limiting preexisting medical conditions. A preexisting condition is something a person receives medical treatment for during the six months before enrolling in a new plan.

Before HIPAA, health plans could deny coverage of an individual's preexisting condition for over 12 months. Now, the preexisting coverage exclusion can apply in certain circumstances for generally only 12 months (or 18 months for late enrollees).

The U.S. Department of Labor (DOL) requires employers to give new employees credit for the time they had health coverage. Employers or previous insurers provide this credit through the Certificate of Creditable Coverage. This certificate shows that the employee's insurance coverage ended. It aims to prevent gaps or exclusions in your health coverage. These certificates include information on when the employee and any dependents had coverage. Plans after July 2005 should also include a statement about the employees' HIPAA rights.

Newborns' and Mothers' Health Protection Act

The Newborns' and Mothers' Health Protection Act (the Newborns' Act) was enacted in 1996. It aims to give protections relating to the length of hospital stays after childbirth for mothers and their newborns.

The Newborns' Act requires plans that offer maternity coverage to pay for at least a 48-hour hospital stay following vaginal childbirth—or 96 hours for a cesarean section. Many states have their own version of the Newborns' Act so that state law may govern instead of federal laws. With this, it is crucial to determine which law applies to your plan.

Mental Health Parity and Addiction Equity Act

Another important ERISA amendment is the Mental Health Parity and Addiction Equity Act (MHPAEA). Congress passed MHPAEA in 2008 to ensure that mental illness is treated equally to other medical issues. The MHPAEA requires that group health plan financials, such as deductibles and co-pays, for mental health and substance use disorder be no more restrictive than other conditions. The limits applied must be comparable to those for other medical benefits.

The MHPAEA applies to:

• Health insurance issuers who sell coverage to employers with more than 50 employees
• Plans sponsored by public and private sector employers with more than 50 employees

This Act does not require that health plans provide mental illness benefits. But if they do provide such benefits, they must follow the provisions in the MHPAEA.

Women's Health and Cancer Rights Act

The Women's Health and Cancer Rights Act (WHRCA) was signed into law in 1998. The legislation aims to protect patients having breast reconstructive surgery after a mastectomy. The Act requires that plans offering coverage for a mastectomy also include coverage for breast reconstruction. It also requires group health plans and insurance companies to give notice about this coverage.

Affordable Care Act

The Affordable Care Act (ACA) also offered reforms in the health insurance market. The ACA required employers with over 50 employees to:

• Offer health insurance coverage
• Provide equal coverage for all preexisting health conditions

Through the ACA, dependent children of employees can also continue to benefit from their parents' health care plan until they are 26 years old. The ACA also eliminated the annual dollar caps on essential health benefits.

The Future of ERISA

Members of Congress introduced several bills that would amend specific provisions of the ERISA.

In September 2023, representatives of the House introduced a few bills that aim to amend certain provisions of ERISA.

Retirement Proxy Protection Act

Indiana Rep. Erin Houchin introduced the Retirement Proxy Protection Act (H.R. 5337). The bill aims to clarify fiduciary responsibilities under ERISA. It covers, in particular, stock plan assets, management of shareholders' rights, and the right to vote via proxies.

Under this proposed law, plan fiduciaries would be required to focus on the "financial interests" of the participants and beneficiaries. The bill aims to prioritize these financial interests over environmental, social and governance (ESG) considerations. 

Many investors use an ESG approach to ensure they are investing in companies that align with their values. For example, focusing on investments related to companies that prioritize green energy, diversity in hiring, or ethical business practices.

The bill also requires the plan fiduciary to exercise "diligence and prudence" when choosing and overseeing any advisors or service providers. If the plan gives investment manager or proxy firm the authority to exercise these shareholder rights, the plan fiduciary should carefully monitor their voting practices. The plan fiduciary should ensure they follow the guidelines.

No Discrimination in My Benefits Act

Virginia Rep. Bob Good introduced the No Discrimination in My Benefits Act, (H.R. 5338.) The bill aims to amend the "prudent man standard of care" specified under ERISA. This standard ensures that the selection, retention, and monitoring of plan fiduciaries, service providers, or employees of the plan is without discrimination. It prohibits discrimination based on race, sex, religion, color, or national origin.

Roll Back to ESG To Increase Retirement Earnings Act (RETIRE Act)

Meanwhile, Georgia Rep. Rick Allen introduced the RETIRE Act (H.R. 5339). The bill would amend fiduciary acts related to investment. It would amend ERISA to state that fiduciary acts should be based solely on the financial factors and interests of the participants. 

Like the Retirement Proxy Protection Act, this bill also aims to prevent fiduciaries from considering ESG factors when making investments for retirement plans.

However, in cases where the plan fiduciaries find it hard to pick between investment alternatives based on financial factors, they could consider the nonfinancial criteria if they document their reasoning.

In 2024, the bill was amended to become the Protecting Americans' Investments from Woke Policies Act. It combines the Retirement Proxy Protection Act and the No Discrimination in My Benefits Act (discussed above) with the RETIRE Act and another bill (H.R. 5340). It passed in the House on September 18, 2024. 

These bills did not become law. However, they could be reintroduced and make their way through the legislative process in a new format. 

ERISA Reporting and Disclosure Requirements

ERISA has several reporting requirements for plan administrators and plan sponsors. These requirements include the following:

• Recordkeeping: ERISA requires employer plans to maintain a recordkeeping system. The system aims to track contributions, expenses, and benefits distribution properly. It also assists the plan administrator and plan sponsor in preparing the plan's annual return or report.
• Reporting: Title I and Title IV of ERISA and the Internal Revenue Code have reporting requirements. Plan administrators use various forms to meet the annual reporting requirements, including Form 5500 Annual Return/Report form.

To learn more about the ERISA reporting requirements, see FindLaw's article Reporting and Disclosure Guide for Employee Benefit Plans.

Penalties for Violations of ERISA Provisions

The Department of Labor (DOL) is responsible for enforcing ERISA provisions. Title I, Part 5 gives the DOL the power to initiate a civil action to address ERISA law violations and investigate any violations. Title I also provides criminal penalties for any willful violation of the Act.

ERISA section 502(I) requires the DOL to assess compulsory civil penalties. When the DOL recovers any amount due to a violation of ERISA, it charges a civil penalty, which amounts to 20% of the total amount recovered. The money that the DOL recovers often comes from either the settlement agreement of the parties or through a court order.

Meanwhile, the Employee Benefits Security Administration (EBSA) can provide civil penalties for other violations. For instance, EBSA can fine plan administrators up to $1,100 daily for failure to report. This penalty is chargeable to the plan administrator who fails to meet the yearly reporting requirements. 

EBSA also provides penalties to parties involved in illegal transactions. Penalties for illegal transactions of the plan administrator range from 5% to 100% of the amount involved.

The Internal Revenue Code also imposes an excise tax on those who engage in illegal transactions. This sanction applies to disqualified persons, including plan sponsors and service providers.

How to Find Legal Advice

It can be challenging to navigate the complex rules of ERISA and its amendments. If you need further guidance on how these laws affect you, seeking legal advice from an employment attorney can be helpful.

An employment attorney with experience handling ERISA-related issues can help you understand your rights and responsibilities. They can assist you with your claims and ensure they comply with regulatory requirements. Contact an ERISA attorney near you to learn more about your welfare benefit plan and secure your interests.