Today is National Employee Benefits Day. According to the Employee Benefits Research Institute, almost nine in ten people don’t think they’ll have enough saved when they get to retirement. Study after study provides data pointing to the same conclusion: A crisis is coming. Are your plan participants prepared for it?
Learn more at the International Foundation of Employee Benefits.
Jeffrey R. Ungvary
The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for retirement and health benefit plans in private industry. ERISA does not require any employer to establish a plan. It only requires that those who establish plans meet certain minimum standards.
ERISA covers retirement, health and other welfare benefit plans (e.g., life, disability and apprenticeship plans). Among other things, ERISA provides that those individuals who manage plans (and other fiduciaries) must meet certain standards of conduct. The law also contains detailed provisions for reporting to the government and disclosure to participants. There also are rules aimed at assuring that plan funds are protected and that participants who qualify receive their benefits.
ISA has also been expanded to include health laws. For example, the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) amended ERISA to provide for the continuation of health care coverage for employees and their beneficiaries (for a limited period of time) if certain events would otherwise result in a reduction in benefits. In addition, the Health Insurance Portability and Accountability Act of 1996 (HIPAA) amended ERISA to make health care coverage more portable and secure for employees.
Health Plans as Welfare Benefit Plans Under ERISA
According to ERISA, an employee welfare benefit plan is any plan, fund, or program which is established or maintained by an employer or by an employee organization, or by both, to the extent that such plan, fund, or program was established or is maintained for the purpose of providing:
- Medical, surgical, or hospital care or benefits;
- Benefits in the event of sickness, accident, disability, death or unemployment;
- Vacation benefits;
- Apprenticeship or other training programs;
- Day care centers;
- Scholarship funds;
- Prepaid legal services, or
- Certain other benefits described in the Labor-Management Relations Act of 1947
Jeffrey R. Ungvary
As we consider retiring, it’s imperative that pre-retirees and early retires prepare themselves for their healthcare expenses in retirement.
Pre and early retirees should know once they hit age 65, they’re allowed to apply for Medicare, but they’re also allowed to buy a plan through the Exchange. If you’re considering buying through an Exchange, it’s important to factor plans based on network, benefits, and affordability.
For early retirees, compare the cost of COBRA vs. individual health insurance through the marketplaces. According to studies, a Silver individual health plan through the marketplace would cost $336 a month (national average). For COBRA, you’re usually required to pay the entire premium plus up to a 2% administrative fee. In most cases, COBRA may be costlier than purchasing through the Exchange, but you should calculate each cost to decide which option is more cost effective.