Labor FAQs – Employee Benefits

Q: Do summaries of benefit plans have to be provided to covered dependants of employees?

A: Yes. Regulations of the United States Department of Labor require that benefit plan summaries be provided to covered dependants who are receiving plan benefits.

Q: Are severance plans subject to governmental regulation?

A: Yes. The federal Employee Retirement Income Security Act (“ERISA”) regulates severance benefits. If a severance pay situation is not a part of an ERISA covered plan, it is subject to contract, tort and other state and local laws, which generally are not as favorable to employers because of the potential for expensive jury trials and punitive and compensatory damage awards. Plans that are covered by ERISA cannot be regulated directly by the states. Generally, the only things that can be recovered in an ERISA lawsuit are the benefit denied and attorneys fees and costs.

Q: Is health plan coverage provided under a cafeteria plan subject to the federal health care continuation requirements of the Consolidated Omnibus Budget Reconciliation Act (“COBRA”)?

A: Yes, where the particular employee could benefit from continuation of the cafeteria plan coverage during the period that the employee is eligible to purchase COBRA coverage. For example, cafeteria plan coverage must be continued when the health plan is otherwise subject to COBRA and the employee would owe less in premiums than the employee has available for reimbursement under the cafeteria plan.

Q: Are vacation, sick pay and holiday pay plans subject to government regulation?

A: Yes. If the vacation, sick pay or holiday pay plan is not funded through a trust, but rather is funded from an employer’s general assets, the plan is subject to contract, tort and other state and local laws. Funded vacation, sick pay and holiday plans are subject to ERISA. Plans that are covered by ERISA cannot be regulated directly by the states.

Q: May our health plan condition enrollment or continued enrollment on either health status, claims experience, medical history, genetic information or evidence of insurability?

A: No. The Health Insurance Portability and Accountability Act (HIPAA) prohibits placing such conditions on health plan enrollment.