What laws guide discretionary employee benefits provided by employers?

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Tamara K. H. eNotes educator| Certified Educator

Another term for the discretionary benefits an employer can offer an employee is voluntary benefits, and they are just that--voluntary. In other words, the government leaves it up to employers to offer these benefits to employees at the employer's own discretion, or voluntary choice. Therefore, there are no laws legally requiring discretionary benefits; however, The Employee Retirement Income Security Act of 1974 (ERISA) does set legal standards for an employer to follow should the employer choose to offer discretionary benefits.

Discretionary benefits include offering "payment for time not worked," such as paid sick leave and paid vacations; health insurance plans; security benefits, such as "retirement plans, disability insurance, life insurance," and supplemental unemployment compensation; "employee services," such as benefits to cover the costs of relocating for the job, child care, reimbursement for continued education, cafeterias or other food services, and counseling or other wellness services; and "premium pay," meaning compensation to employees working under dangerous conditions or stressful conditions like overly long work hours, otherwise known as hazard pay and shift differentials ("Voluntary or Discretionary Benefits").

While the title of the Employee Retirement Income Security Act specifically addresses retirement, the act actually covers many of the above listed discretionary benefits, such as "health and other welfare benefit plans" ("Compliance Assistance"). Specifically, the act was established to ensure employers followed minimum standards if they chose to offer any of the above benefits. While the act does not set out to establish a minimum level of benefits, such as pension benefits, it does establish minimum funding requirements, such as rules for who will receive pension payments and when and rules to guarantee payments even if the employer becomes unable. Likewise, while the act does not require an employer to offer health insurance, it does regulate the plan should the employer decide to offer one. In fact, two amendments have been made to the ERISA to regulate health insurance plans, the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) and the Health Insurance Portability and Accountability Act of 1996 (HIPAA). Under COBRA, should an employee's employment be involuntarily terminated, the employee can still retain health insurance benefits for usually up to 18 months but also for up to 29 months if the Social Security Administration deems the employee disabled and up to 36 months should coverage be lost due to divorcing the covered employee or the employee's death ("Consolidated Omnibus Budget Reconciliation Act of 1985"). Under HIPAA, group health insurance policies are still permitted to exclude coverage to employees for any preexisting condition but only up to a period of 12 to 18 months after enrollment; however, HIPAA permits individuals to reduce this amount of exclusion time so long as they already had other "creditable coverage" for the preexisting condition, including other health care plans, Medicaid, and Medicare ("Health Insurance Portability and Accountability Act").  

Hence, some examples of laws set in place to protect discretionary benefits are ERISA, COBRA, and HIPPA.