What health plans are and aren’t covered by ERISA

If you offer employee benefits to workers in the United States, there’s a very good chance they fall under the regulations of the federal Employee Retirement Income Security Act of 1974 (ERISA)¹.

Congress enacted ERISA to protect the interests of employees who participate in your benefit plans. It set minimum standards and created documentation requirements to ensure employees receive the benefits they’re entitled to.

ERISA applies to most employer-sponsored benefit plans, but there are specific plans ERISA doesn’t cover, making it challenging for many employers to determine if their benefits fall under the law.

This article will review which health plans ERISA covers. We’ll also explain some of the ERISA requirements you may face depending on the benefits you offer.

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Which plans does ERISA cover?

ERISA protects employees who participate in certain health and retirement plans at private organizations. The law applies to many types of employers, including sole proprietorships, S corporations, C corporations, limited liability companies, and partnerships.

While ERISA covers a variety of employee benefit plans, not all health plans fall under its regulations. There are two categories of plans under ERISA: welfare benefit plans and pension benefit plans. We’ll focus on welfare benefit plans in this article.

Employer-sponsored group plans are subject to ERISA. This includes self-insured health plans, which typically aren’t subject to state insurance laws. ERISA exempts these self-funded plans from certain state laws. Fully insured health plans are also subject to the regulation and any applicable state insurance laws.

Plans in which the employer doesn’t contribute and that are completely voluntary may be exempt. ERISA also doesn’t cover any public sector or church-sponsored plans.

Employer-sponsored health benefits subject to ERISA

Plan	Description
Disease management programs	Disease management programs are a type of employer-sponsored benefit that aims to help employees manage chronic diseases. Organizations can offer these programs to employees for help with asthma, breast cancer, diabetes, and more.
Employee assistance programs (EAPs)	An EAP is a work-sponsored program that provides employees with free assessments and counseling services.
Group health insurance	A traditional group health insurance plan is the most popular type of health benefit. It provides employees and their dependents with access to comprehensive healthcare coverage. While group coverage is a common benefit—according to the U.S. Census², 54.3% of Americans have it—it can be more expensive for employers than alternatives. Employers are also subject to annual rate increases, minimum participation requirements, and administrative challenges.
Group life insurance	Life insurance³ provides your employees’ beneficiaries with funds in the event of the employee’s death. Beneficiaries often use funds to pay off debts for the deceased, pay for funeral expenses, and provide financial stability.
Group vision insurance	A group vision insurance plan provides vision coverage to employees. This generally includes coverage for eye exams, glasses, and contact lenses.
Healthcare flexible spending accounts (FSAs)	A healthcare FSA allows employers to reimburse employees tax-free for qualifying medical expenses like copays and prescriptions. Employers can’t reimburse employees for insurance premiums.
Health reimbursement arrangements (HRAs)	An HRA allows employers to reimburse their employees tax-free for qualifying medical expenses. Depending on the type of HRA you offer, this can include individual health insurance premiums. Both group coverage HRAs (GCHRAs) and individual coverage HRAs (ICHRAs) are considered group plans under ERISA. A qualified small employer HRA (QSEHRA) isn’t a group plan, but it is still subject to many ERISA regulations.
Long-term disability insurance	Long-term disability insurance provides support to employees with disabilities in addition to any Social Security benefits they may receive.
Prescription drug coverage	Prescription drug coverage is an ancillary benefit meant to supplement a group health insurance plan.
Wellness programs	There are many types of wellness programs, from smoking cessation to wellness stipends. However, not all wellness programs are subject to ERISA. If your wellness program provides medical care, such as counseling or employer-paid vaccinations, it may be subject to ERISA as a group health plan.

Health plans not subject to ERISA

Now that we’ve reviewed which health plans ERISA applies to, let’s look at some exempt plans.

Plan	Description
Plans governmental entities provide, including federal, state, and local governments	Public employees don’t have ERISA protections since the law only applies to private companies. This can include teachers, law enforcement, members of the military, employees of federal and state agencies, and more. However, plans offered through a union or association may be subject to ERISA.
Plans from religious organizations	Churches and many nonprofits run by churches that offer health plans are exempt from ERISA.
Plans established outside the U.S.	If you offer a plan outside of the U.S. for nonresident aliens, it isn’t subject to ERISA.
Health savings accounts (HSAs)	HSAs aren’t subject⁴ to ERISA if employee contributions are voluntary and you allow employees to transfer funds to another HSA. You also can’t limit how employees use their funds. Otherwise, it will be subject to ERISA.

How ERISA affects healthcare plans

Under ERISA, employer-sponsored group health plan providers must inform plan participants of their plan details. This includes who is eligible for coverage, what benefits employees and dependents can access, how much the plan costs (including premiums, deductibles, and copays), and any information regarding healthcare networks.

There are also disclosure and reporting requirements, which we’ll discuss in more detail below.

The Employee Benefits Security Administration (EBSA) regulates ERISA and provides education to employers and employees. These have changed much since 1974.

The federal government passed multiple amendments to the law, expanding the score. These amendments include the following:

The Consolidated Omnibus Budget Reconciliation Act (COBRA): Congress passed COBRA in 1985 to ensure workers and their dependents under a group plan have access to continuation of health coverage after a change in employment.
The Health Insurance Portability and Accountability Act of 1996 (HIPAA): HIPAA outlines regulations for keeping individuals’ protected health information (PHI) safe.
The Affordable Care Act (ACA): This law established new protections for individuals with health insurance—such as capping out-of-pocket expenses—and established regulations for the individual health insurance market. It also requires employers with 50 or more full-time equivalent employees (FTEs) to offer affordable health insurance to their employees. This coverage must include minimum essential coverage (MEC) and meet minimum value (MV) requirements.

Disclosure requirements and plan documents for health plans

ERISA has many requirements for plan sponsors to provide certain disclosures⁵ and plan documents. We’ve provided a list of some of these requirements below.

Document	Explanation
Plan documents	Your plan documents should include: The responsibilities of named plan fiduciaries and administrators Requirements for benefit eligibility The effective participation dates A description of your benefits How you fund your benefit Procedures for filing claims HIPAA privacy officers The processes for amending your plan or terminating benefits
Summary plan description (SPD)	An SPD⁶ must explain your benefits in plain language and inform participants of their rights and responsibilities. It must also include information about your plan, benefits, how to file a claim, and notices of the HIPAA privacy rule. You must provide this document to employees within 90 days of the employee beginning coverage or within 30 days of a request.
Summary of benefits and coverage (SBC)	The ACA requires insurers and group plan administrators to provide individuals with an SBC. This provides an overview of the plan to help them decide if they want to enroll.
Summary of material modification	The ACA amended ERISA regulations to require a 60-day summary of material modification. If you make any plan changes that affect your SPD or SBC, you must issue a 60-day notice.
Form 5500: Summary annual report	Organizations must file Form 5500 with the Department of Labor each year. It provides information about your plan’s financial condition and operations.
Summary of material reduction in covered services or benefits⁷	This document provides participants with a summary of changes to their SPD. You must issue it within 60 days of adopting the reduction in plan services or benefits.
COBRA general notice	You must notify participants of their right to purchase continuation of healthcare coverage if they experience a qualifying event.
COBRA election notice	When a qualifying event occurs, you must provide a COBRA election notice. This informs former employees or their beneficiaries of the right to elect COBRA.
CHIPRA notice	Employers must inform employees of any premium assistance available from the Children’s Health Insurance Program (CHIP) in their state.⁸
Wellness program disclosure	If your wellness program provides a reward and is contingent on certain health outcomes, you must provide a wellness program disclosure.

This isn’t a comprehensive list of the disclosure and reporting requirements your health benefit plans may have. Failure to comply with reporting and disclosure requirements for your plan could result in penalties.

Retirement plans and other benefits subject to ERISA

ERISA also applies to employer-sponsored retirement plans. This includes defined benefit plans—which promise a monthly benefit upon retirement—and defined contribution plans—such as a 401(k).

This includes the following types of retirement benefits:

Pension plans
401(k) plans
403(b) plans
SIMPLE individual retirement accounts (IRAs)

Additionally, ERISA may apply to certain vacation benefits and educational programs. However, there are payroll practice exemptions available.

How third-party administrators and benefits administration software can help

If you’re a private employer with a qualifying retirement or welfare plan subject to ERISA, you can seek the help of a third-party administrator or broker to ensure your benefits comply with federal regulations.

These professionals can help you design your employee benefits plans to meet regulations, stay up to date with compliance filings and reports, and audit your benefits for any issues.

If you plan to offer an HRA to your employees, PeopleKeep can help. Our HRA administration software automatically generates plan documents, including your SPD. Our award-winning customer support team is available to help you implement your benefit and provide resources to help you with annual reporting. With our easy-to-use software, you can manage your HRA in minutes each month.

Conclusion

Offering employer-sponsored plans is a great way to attract and retain top talent. Without a comprehensive benefits package, you’ll have a hard time keeping your employees satisfied. While health insurance is the most-requested employee benefit, understanding which health plans are subject to ERISA is critical for maintaining compliance and avoiding steep penalties.

The tips in this article will provide a starting point for helping you understand the fiduciary standards and reporting requirements that come with ERISA.

The information in this article is for informational purposes. If you need help determining if your welfare plan is subject to ERISA, we recommend contacting a professional advisor or attorney.

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Chase Charaba

Chase Charaba is the content marketing manager at PeopleKeep. He started with the company as a content marketing specialist in early 2022. Chase has written more than 350 blog posts for various companies and personal projects throughout his career. He’s worked for digital marketing agencies, in-house marketing teams, and as the editor for national award-winning high school and college newspapers. He’s also a YouTuber, landscape photographer, and small business owner.