ERISA Compliance Checklist for Employers to Stay Audit-Ready

May 30, 2025

As an employer offering retirement or health benefit plans, navigating the complex landscape of ERISA compliance can feel overwhelming. The Employee Retirement Income Security Act (ERISA) establishes critical standards that protect both your business and your employees—yet many organizations struggle to maintain full compliance, potentially exposing themselves to significant penalties and legal complications.

Whether you’re a small business owner just beginning to offer benefits or an established HR professional managing multiple plans, staying audit-ready isn’t just about avoiding penalties—it’s about fulfilling your fiduciary responsibility to your employees and protecting your company’s financial health.

In this comprehensive guide, we’ll walk through an actionable ERISA compliance checklist that helps plan sponsors and HR teams maintain proper documentation, meet filing deadlines, fulfill fiduciary obligations, and satisfy bonding requirements. By implementing these practices, you’ll not only minimize compliance risks but also strengthen the foundation of your employee benefits program.

TL;DR - ERISA Compliance Checklist

ERISA compliance requires meticulous attention to documentation, reporting, and fiduciary responsibilities. Key compliance areas include: maintaining comprehensive plan documents and summary plan descriptions (SPDs), filing Form 5500 annually, fulfilling fiduciary duties through prudent plan management, conducting regular plan audits, maintaining proper fidelity bonds, and establishing clear communication protocols with participants. Non-compliance can result in significant penalties—up to $1,100 per day for certain violations—making a systematic compliance approach essential for all plan sponsors. Regular self-audits using Department of Labor guidelines can help identify and address potential issues before they trigger regulatory action.

What Is ERISA and Why It Matters?

The Employee Retirement Income Security Act of 1974, commonly known as ERISA, represents one of the most significant pieces of federal legislation governing employee benefits in the United States. Enacted in response to widespread concerns about the mismanagement and failure of pension plans, ERISA established comprehensive standards designed to protect the interests of employee benefit plan participants and their beneficiaries.

The Foundation of Employee Benefit Protection

At its core, ERISA serves as a protective framework that ensures employees receive the benefits promised to them. The law applies to most voluntarily established retirement and health plans in private industry, covering an estimated 141 million American workers and more than $12 trillion in plan assets. This federal statute doesn’t require employers to establish benefit plans, but it sets mandatory rules for those who do.

ERISA’s jurisdiction extends to:

Defined benefit pension plans
401(k) and other defined contribution plans
Health insurance and medical plans
Dental and vision plans
Life and disability insurance
Severance plans
Scholarship funds
Apprenticeship programs

Key Protections Under ERISA

ERISA’s framework creates several critical protections that directly impact both employers and employees:

Fiduciary Responsibilities: Perhaps most importantly, ERISA establishes strict fiduciary duties for plan administrators. These individuals must act solely in the interest of plan participants and beneficiaries, with the exclusive purpose of providing benefits and paying only reasonable plan expenses. This “prudent expert” standard represents one of the highest forms of fiduciary duty recognized by law.

Reporting and Disclosure: ERISA mandates transparency through comprehensive reporting to government agencies and disclosure to plan participants. This includes providing Summary Plan Descriptions (SPDs), Summary Annual Reports (SARs), and access to detailed plan information upon request.

Minimum Standards: The law establishes minimum standards for participation, vesting, benefit accrual, and funding. These standards ensure that employees can qualify for benefits within reasonable timeframes and that plans maintain adequate funding levels.

Enforcement Mechanisms: ERISA grants participants the right to sue for benefits and breaches of fiduciary duty, while also giving the Department of Labor extensive enforcement authority. This dual enforcement approach creates significant accountability for plan sponsors.

How ERISA Non-Compliance Affects Your Business

Non-compliance with ERISA regulations can have serious and far-reaching consequences for your business. Understanding these potential impacts is essential for prioritizing your compliance efforts and allocating appropriate resources to your benefits administration.

Financial Penalties and Enforcement Actions

ERISA Non-Compliance Penalties

Type of Violation	Maximum Penalty	Details	Potential Financial Impact
Late or Missing Form 5500	$1,100 per day	No maximum cap on penalties Penalties accrue daily until filing DOL’s Delinquent Filer Voluntary Compliance Program (DFVCP) available for reduced penalties	Example: A plan that is 1 year late filing Form 5500 could face penalties of $401,500 ($1,100 × 365 days)
Missing or Late SPD/SMM Distribution	$110 per day per participant	Applies to failure to provide required disclosures Calculated per affected participant Separate from other document penalties	Example: A company with 500 employees that fails to provide SPDs for 30 days could face penalties of $1,650,000 ($110 × 500 participants × 30 days)
Prohibited Transactions	15% of amount involved	Initial excise tax of 15% of the amount involved Increases to 100% if not corrected promptly Applies to each year in the taxable period	Example: A prohibited loan of $100,000 could result in initial penalties of $15,000, increasing to $100,000 if not corrected
Breach of Fiduciary Duty	20% of recovery amount	Civil penalties up to 20% of applicable recovery amount Personal liability for fiduciaries Potential removal from fiduciary position Restoration of losses to the plan	Example: A fiduciary breach resulting in $500,000 in plan losses could lead to $100,000 in penalties plus restoration of the full $500,000

This table outlines the maximum statutory penalties for common ERISA violations. Actual penalties may be adjusted for inflation and specific circumstances.

Legal Vulnerability and Litigation Risk

Beyond regulatory penalties, ERISA non-compliance significantly increases your exposure to participant lawsuits:

Participant Civil Actions: ERISA grants participants the right to sue for benefits due, enforcement of rights under the plan, or breach of fiduciary duty. These lawsuits can be costly to defend, even if ultimately unsuccessful.

Class Action Exposure: ERISA claims are frequently pursued as class actions, dramatically increasing potential liability and legal costs. Recent years have seen a surge in ERISA class action litigation, particularly regarding excessive fees and imprudent investments.

Personal Liability: Plan fiduciaries can be held personally liable for losses resulting from breaches of their duties, creating significant risk for individual decision-makers within your organization.

Complete ERISA Compliance Checklist

Maintaining ERISA compliance requires systematic attention to documentation, reporting, disclosure, and fiduciary responsibilities. This comprehensive checklist organizes essential compliance tasks into key categories to help plan sponsors and HR teams stay audit-ready.

ERISA Compliance Checklist: Key Categories and Risk Levels

Compliance Category	Key Requirements	Risk Level
Plan Documentation	Plan Document, SPD, SMM, SAR	High
Reporting & Filing	Form 5500, 8955-SSA, Fee Disclosures	Very High
Fiduciary Responsibilities	Loyalty, Prudence, Diversification, Plan Adherence	Very High
Bonding Requirements	ERISA Fidelity Bond (10% of funds handled)	Medium
Participant Communications	Required Notices, Claims Procedures	High
Operational Compliance	Eligibility, Contributions, Distributions, Testing	High

This table outlines the key ERISA compliance categories, their essential requirements, and associated risk levels for non-compliance. Categories with “Very High” risk levels require immediate attention from plan sponsors.

Plan Documentation Requirements

The foundation of ERISA compliance lies in proper documentation. Every ERISA-covered plan must maintain these essential documents:

Plan Document: This formal written instrument establishes and governs your benefit plan, containing all provisions required by ERISA. Your plan document must include:

Procedure for establishing and carrying out a funding policy
Procedure for allocating operational and administrative responsibilities
Provisions for plan amendment and termination procedures
Specification of basis for payments to and from the plan
Named fiduciary designation

Summary Plan Description (SPD): This plain-language explanation of the plan must be provided to participants and beneficiaries. SPDs must:

Be written in a manner calculated to be understood by the average plan participant
Be sufficiently comprehensive to inform participants of their rights and obligations
Include specific content required by DOL regulations
Be distributed within 90 days of enrollment for new participants
Be redistributed every 5 years if changes are made, or every 10 years if no changes

Operational Compliance Calendar

ERISA Compliance Annual Timeline

Key Deadlines and Activities for Plan Sponsors

Q1 (Jan-Mar)

Q2 (Apr-Jun)

Q3 (Jul-Sep)

Q4 (Oct-Dec)

First Quarter	Second Quarter	Third Quarter	Fourth Quarter
Provide Q4 benefit statements (within 45 days after quarter end) Make prior-year employer contributions for tax deduction Prepare for ADP/ACP testing January 31: Distribute W-2s and 1099-Rs	Provide Q1 benefit statements Distribute excess deferrals made above IRC Section 402(g) limit Process first-year RMDs for participants who turned 73 in prior year April 15: Process excess deferrals	Provide Q2 benefit statements File Form 5500 for prior year or file extension Distribute Summary Annual Report for prior year July 31: Form 5500 due (calendar year plans)	Provide Q3 benefit statements Send required notices (safe harbor, QDIA, automatic enrollment) Process RMDs Prepare for year-end compliance activities December 31: Process RMDs, complete year-end compliance

Note: Timeline based on calendar year plans. Specific dates may vary based on plan year and extensions.

Common ERISA Compliance Pitfalls to Avoid

Even with the best intentions, plan sponsors frequently encounter compliance challenges that can lead to violations. Understanding these common pitfalls can help you proactively address potential problem areas before they trigger regulatory scrutiny or participant complaints.

Documentation Deficiencies

Outdated or Missing Plan Documents: One of the most prevalent compliance failures is operating with outdated plan documents or missing required documentation entirely. This often occurs when: Plan amendments aren’t properly documented SPDs aren’t updated to reflect plan changes Plan operations evolve without corresponding document updates Documents aren’t preserved for the required retention period (generally at least six years)

When to Consider Hiring ERISA Compliance Experts

While many organizations manage ERISA compliance internally, certain situations warrant bringing in specialized expertise. Understanding when to engage professional help can prevent costly compliance failures and provide valuable peace of mind.

Complexity Thresholds That Signal Expert Need

Plan Size and Complexity: As your benefit plans grow in size and complexity, the compliance burden increases exponentially:

Plans with 100+ participants requiring annual audits
Multiple benefit plans with different requirements
Plans with unique features or complex designs
Plans holding employer securities or alternative investments

Frequently Asked Questions (FAQs)

Do All Employers Need to File Form 5500?

Not all employers are required to file Form 5500. The filing requirement depends on the type of benefit plan and its size:

Plans Generally Required to File Form 5500:

Retirement plans (401(k), profit sharing, defined benefit) with 1 or more participants
Welfare benefit plans (health, dental, vision, disability, etc.) with 100 or more participants
Multiple employer welfare arrangements (MEWAs), regardless of size

How Often Should I Update Plan Documents or Disclosures?

Plan documents and disclosures require regular updates to maintain compliance with changing regulations and plan operations:

Required Update Frequencies:

Plan Documents: Must be amended for regulatory changes by deadlines specified in IRS or DOL guidance, which vary by type of change. Additionally, discretionary amendments should be adopted by the end of the plan year in which the change becomes effective.
Summary Plan Descriptions (SPDs): Must be updated and redistributed:
- Every 5 years if the plan has been amended
- Every 10 years even if no changes have been made
- Within 210 days after the end of the plan year in which a material change was made (via a Summary of Material Modifications)

Conclusion

Navigating ERISA compliance doesn’t have to be overwhelming. By implementing a systematic approach to documentation, reporting, fiduciary responsibilities, and participant communications, employers can significantly reduce compliance risks while enhancing the value of their benefit programs.

The comprehensive checklist provided in this article offers a roadmap for maintaining compliance across all critical areas of ERISA regulation. By addressing each component methodically—from plan documentation and reporting requirements to fiduciary responsibilities and operational compliance—plan sponsors can develop robust compliance systems that withstand regulatory scrutiny.

Remember that ERISA compliance is not a one-time event but an ongoing process requiring regular attention and updates. As regulations evolve and your benefit plans change, your compliance approach must adapt accordingly. Establishing a regular review schedule, maintaining clear documentation of compliance activities, and seeking expert guidance when needed are essential practices for long-term compliance success.