Working for a small business can be an exceptionally gratifying way to earn a living. Many of the headaches that come with working for large corporations do not exist and you can have a greater connection to your employer. However, one thing you may wonder is what a small business is required to do with respect to your retirement and health benefits. Does their size mean they get special treatment?
What is ERISA?
The Employee Retirement Income Security Act (ERISA) is a federal law that places requirements on employers who offer retirement and health benefits to their employees. The law is there to protect employees, so that they can count on the benefits they are promised. ERISA applies to nearly every private business, including small business, so long as they offer benefits to any employee.
What does ERISA require?
Employers must give certain information to employees, in writing. A summary of the plan itself – whether it’s a retirement plan, health benefits or disability benefits – is required both initially and whenever the plan undergoes a modification or update. It must include what the plan provides and how it operates, and has to explain how the employee accesses the benefits when they need to. Employees are also entitled to details of the benefits, including what is covered and what is not, and any cost-sharing provisions.
ERISA also requires the employer, or whoever the employer chooses to administer the plan, to act as a fiduciary. This means that they cannot make decisions regarding the plan out of self-interest. Instead, the plan must be managed in the interest of the plan’s beneficiaries, minimizing the risk of losses and avoiding conflicts of interest. Fiduciaries who violate this duty can be held personally liable for financial losses or removed from their role entirely.