Question

Finding a life insurance company to provide benefits to its workforce has been difficult for Joan, the HR manager. She decides to recommend that her company offer a self-insured plan. What controls might Joan have to consider in her planning?

A. There are no federal restrictions on a company providing its own life insurance plan to employees.
B. The Employee Retirement Income Security Act regulates welfare benefit plans, including life insurance.
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C. The Life Insurance Benefit Plans Act has control over what Joan is able to do with her idea.
D. Only state laws will have an influence on Joan's development of a self-insured benefit plan.

Answer 1

Joan, the HR manager, should consider the Employee Retirement Income Security Act (ERISA) when planning a self-insured life insurance plan for her company. ERISA encompasses federal standards and protections for employee welfare benefit plans. Contrary to options that suggest no federal restrictions or only state law considerations, ERISA is centrally important for compliance.

Step-by-step explanation:

HR manager Joan is considering a self-insured plan for her company's employee benefits, including life insurance. In this regard, she must be aware of certain regulatory frameworks that could impact her planning. The correct control to consider in her planning is stated in option B, which is that the Employee Retirement Income Security Act (ERISA) regulates welfare benefit plans, including life insurance. ERISA is a federal law that sets minimum standards for most voluntarily established retirement and health plans in private industry to provide protection for individuals in these plans. The act is relevant to Joan's situation as it governs the operation of a health plan and entails various compliance obligations, including financial disclosures, funding requirements, and fiduciary responsibilities.

While it is true that there are state laws related to insurance and employee benefits, federal laws like ERISA are also centrally important. While option A claims there are no federal restrictions, this is inaccurate — ERISA and other federal laws can impose restrictions. The Life Insurance Benefit Plans Act mentioned in option C does not exist, and, while state laws mentioned in option D do have an influence, they are not the sole factor in the development of a self-insured benefit plan.

Furthermore, understanding that life insurance is a form of welfare benefit plan covered under ERISA, Joan would be wise to consider the compliance requirements, reporting and disclosure obligations, and fiduciary duties that come with administering such a plan. It's also important to remember that ERISA stands apart from the pension insurance requirements, which mandate payments to organizations such as the Pension Benefit Guarantee Corporation, and other types of employer insurance obligations, such as workman's compensation insurance and contributions towards Social Security and Medicare.