Maryland Life and Health Insurance License Practice Exam

Which type of employer is required to adhere to ERISA regulations?

1. A local electrical supply company with 12 employees

2. A federal agency

3. A corporation with 50 employees

4. A non-profit organization

The correct answer is: A local electrical supply company with 12 employees

The correct answer pertains to the specific applicability of the Employee Retirement Income Security Act (ERISA). ERISA generally applies to employer-sponsored benefit plans, including retirement plans and health insurance, for companies that are engaged in commerce and have more than a specific number of employees. In this case, a local electrical supply company with 12 employees is considered a private sector employer subject to ERISA regulations, particularly if it offers benefit plans to its employees. The act is designed to protect the interests of employee benefit plan participants and their beneficiaries by requiring transparency and accountability in plan management, which applies regardless of company size, as long as the company is engaged in commerce. It’s important to recognize that federal agencies are not governed by ERISA, as they operate under different regulations and laws. Corporations and non-profit organizations can also be ERISA covered if they provide qualifying plans; however, the mention of 50 employees is linked to certain reporting requirements rather than the general applicability of ERISA itself, which includes smaller employers like the electrical supply company. Thus, the choice representing an employer that must adhere to ERISA directly relates to its industry and capacity to provide benefits, making the local electrical supply company the viable example.