There are many types of features, characteristics and clauses mentioned in the D&O policy document. When you, as a person in charge of recommending a suitable insurance policy to your company, read the document, it is essential to also take note of certain exclusions. The exclusions may have far-reaching implications in employee benefit policies of small businesses. One such exclusion is termed Erisa.
The full-form of ERISA
The full form of ERISA is Employee Retirement Income Security Act. Arguably every D&O Policy has Erisa exclusion, complying with the terms and conditions of the insurance.
Firstly, know about D&O Policy
Before you understand the meaning of Erisa exclusion, it is crucial to know about D&O Policy. It is insurance that protects the Directors and Officers of a company against allegations of a stakeholder. Any costs associated with compensating the third party are covered by the insurer.
Small businesses benefit from D&O Policy
Small businesses, especially in India, particularly benefit from the features of the D&O Policy. If you want a balanced growth of your business, then the Directors and Officers of the company should be able to function in a secure environment. The D&O policy ensures it.
Who can avail the D&O Policy?
It is also quite important to know about the business that can avail D&O Insurance. A private company, a start-up or a public listed company can conveniently get the policy to create a security net for their Directors and Officers associated with the top management.
The policy clearly mentions about Erisa exclusion
The D&O Policy of any standard insurer clearly mentions the Erisa exclusion in its terms and conditions. The exclusion also has certain sub-features that are mentioned, too. As the insured party, the company never should have any doubts about the features of the exclusion.
What is ERISA?
ERISA is legally binding for the company to provide employee benefits to its registered workers, especially permanent employees in most cases. It compels the company to pay a certain amount to an employee on his retirement, within a regulatory framework.
What is the exclusion all about?
In simple terms, the exclusion removes such compulsion from the legal bindings of the company. It means it is not mandatory for the company to pay a security amount to the employee on his retirement. The clause of exclusion provides additional liberty to the company.
It is not mandatory to address the claims
The ELISA exclusion makes it clear that it is not mandatory for the Directors and Officers of a company to address the claims of a stakeholder or third party. They are not liable to pay the claims from a legal perspective.
It complies with the policy’s terms and conditions
As a CA or HR Head, overseeing the implementation of D&O Policy, you can be confident about the fact that the Erisa exclusion perfectly complies with every term and condition of the insurance policy document. You should not have any doubts about this.
What is the meaning of a claim?
You should be aware of the meaning of a claim. A claim can be of many forms. Irrespective of types, all claims have the same implications. A claim can be
- A demand in written format for monetary loss
- A claim can also demand relief of non-monetary nature
Claims should be within the policy period
It is hugely important to note that any claim should be within the D&O Policy period. Any claim made by a stakeholder or third party outside the policy period is invalid. It does not have any legal ground.
Small business should be clear about their employee benefits
Yet another essential point that should be taken into account in this discussion is a concerned small business should be aware of the employee benefits it wishes to cover or plans to implement. It makes it easier for the company to choose and purchase suitable D&O Insurance.
Do not rush in understanding Erisa exclusion
There is no need to hurry in understanding the various aspects of Erisa exclusion. Go through the policy document patiently. Take your time to thoroughly read it. Ask the insurer questions to clear your doubts about the exclusion.
The way it fits in your business’s retirement benefit scheme
It is quite crucial to know how the Erisa exclusion of the D&O Policy fits into the framework of your company’s retirement benefits scheme. Keep in mind that a good policy puts the interests of the company at the forefront.
Avoiding additional expenses
As a business owner, you will be delighted to avoid additional costs for your company when you avail a trusted D&O insurance policy that has a well-defined Erisa exclusion feature. There is no need to entertain the claim from any party regarding retirement benefits.
The insurer takes care of the matter
The company does not have to worry about the costs associated with retirement benefits. The Erisa exclusion cushions the company against such expenses. The insurer takes care of the costs, assessing the different aspects of the claim. As a business owner or a person in the top management, you can relax.
It is legal to apply the feature of Erisa exclusion
Some of you might be in a confused state about the legal implication of applying the feature of Erisa exclusion of D&O Policy. The good thing is it is legal. As a business, you stay within the regulations. It is not an offence or legal breach when a company denies retirement benefits to an employee based on the Erisa exclusion of the D&O Policy.
Talk to the insurer
It is wise to talk to the insurer about a wide range of aspects of the Erisa exclusion. A top-rated insurer or insurance broker will clearly explain to you the various clauses related to the exclusion.
Buy a standard D&O Policy
Ensure buying D&O Insurance containing the Erisa feature from a top insurance broker like PlanCover. It covers the associated costs related to the claims. Your business remains safe against such expenses.