General Benefits Topics: Fiduciary Duties, Administration, and Insured Programs
The General Benefits Topics domain covers the management infrastructure that holds every benefit program together: ERISA fiduciary duties, plan documentation and reporting, vendor oversight, communication, group life and disability design, leave laws, and the accounting that places a liability on the financial statements.
Fiduciary and administration rules
- ERISA §404(a) imposes four duties: act solely in the interest of participants, follow plan documents, act prudently, and diversify investments. The standard is the prudent expert, not the honest amateur.
- §402 requires a written plan document and a summary plan description; the SPD is generally due within 120 days of plan establishment.
- Form 5500 filings are due by the last day of the seventh month after the plan year ends, with a possible 2½-month extension via Form 5558.
- Claims procedures follow 29 CFR 2560.503-1: 15 days for pre-service, 30 days for post-service, and 72 hours for urgent care claims. Disability claims get 45 days with up to two extensions.
Life, disability and leave
- Employer-provided group term life above $50,000 produces imputed income calculated with IRS Table I rates. Premiums for coverage above $50,000 are generally deductible by the employer and taxable to the employee.
- Long-term disability typically replaces 60% of salary, with offsets for Social Security and workers' compensation.
- FMLA gives eligible employees 12 weeks of unpaid leave; eligibility requires 12 months of service and 1,250 hours at a site with 50 or more employees within 75 miles.
Worked example
An employee aged 47 receives $250,000 of group term life. The excess over $50,000 is $200,000, or 200 units of $1,000. Table I for ages 45–49 is $0.15 per $1,000 per month, so monthly imputed income is $30 and annual imputed income is $360. That amount appears on the W-2, but it is not subject to Social Security tax.
Traps that cost marks
Confusing §3(16) administrative fiduciaries with §3(38) investment managers; assuming the SPD satisfies the plan document requirement; and calculating imputed income from the actual premium instead of Table I, which is required unless the insurer's rate is cheaper for the employee.