The Employee Retirement Income Security Act (ERISA) is a federal law which governs the administrative aspects of employee benefit and retirement plans that has been in effect in the United States since 1974. ERISA was intended to reform pension and retirement plans for individuals who work in the private sector as well as to prevent abuse of those plans by their administrators.
This Act requires that clear information be available to plan owners as well as details regarding their plans. An employer who offers employee welfare benefit plans is subject to ERISA provisions.
An individual’s ERISA obligations may be managed by their benefits administrator or their insurance company. Certain types of information are required to be provided under ERISA, including:
- General features of the plan: This includes how it is funded. For example, does the employer match the amount their employee contributes?;
- Length of service: Often, an employee is required work for their employer for a certain amount of time before they are eligible to participate in the plan;
- Minimum contribution: Employees who participate in the plan are required to meet the minimum contribution amount;
- Time of vesting: Employees are also often required to work for a certain amount of time before they are granted access to all of the funds or their share of the funds;
- In general, they will not receive their employer’s contribution if they take the funds out prior to their retirement;
- Process for appealing: When an employee participant has a complaint related to the plan, they should follow the method provided in the plan for filing a grievance; and
- Right to sue: Plan participants should be notified that they may file a lawsuit if the appeals process fails.
ERISA also provides minimum standards for issues such as funding and vesting of plans.
Who Administers Employee Pension and Benefit Plans?
According to ERISA, the employer will administer the plan. If the plan is a retirement plan, the employer is referred to as the fiduciary.
The employer is required to follow the plan as it is written. They will need to provide participant employees with the details of the plan in writing. The employer, or fiduciary, has a duty to their employee participants to them with a reasonable standard of care.
This duty of care includes making decisions related to the plan for the benefit of the plan as well as the participants in the plan. In other words, they should invest wisely and do their best to produce as much money as possible for benefits.
Who Enforces ERISA?
There are certain agencies that enforce ERISA, including:
- The Labor Department’s Employee Benefits Security Administration;
- The Internal Revenue Service; or
- The Pension Benefit Guaranty Corporation.
What Types of Benefits Does ERISA Cover?
ERISA governs a wide variety of employee welfare and benefit plans. The benefits which are covered by ERISA include any plans that employers maintain in order to provide:
- Benefits for:
- disability; or
- Medical, surgical or hospital care;
- Unemployment benefits;
- Apprenticeship and training programs;
- Day care centers;
- Vacation benefits;
- Prepaid legal services; and
- Retirement plans.
What Plans are not Included in ERISA?
ERISA governs private sector plans. Therefore, plans in certain categories are not covered by the Act, including:
- Plans put in place by churches;
- Plans only maintained to comply with unemployment or workers’ compensation;
- Government pension plans for employees who do not work in the United States and who are
- not citizens; and
- Simplified Employee Pension plans (SEPs). These are still retirement accounts set up by employers to help employees save for retirement, but are not subject to the rules and regulations of ERISA.
What are Some of the Main Administrative Requirements Under ERISA?
ERISA plan administrators fulfill the majority of the compliance requirements under the Act. an individual may not have to do anything unless they are acting as their own plan administrator.
In many instances, an individual’s insurance company acts as the plan administrator and handles any obligations. However, it is still important for an individual to be aware of the requirements so that they can ensure that their business is meeting its ERISA obligations.
There are three main components of ERISA compliance, including:
- Disclosure; and
- Paying claims.
Plan administrators are required to report, or file, a summary plan description with the IRS and the department of Labor. This filing is required to include an explanation of the coverage levels and claims procedures of the plan. If a modification is made, such as a decrease or increase in coverage, it is required to be reported.
A plan administrator is required to disclose information to the participants of the plan upon their request. A plan participant can obtain information regarding coverage levels as well as financial information.
Any plan which is subject to ERISA must establish a claims procedure to allow claims for benefits to be processed. The participants in the plan are required to be provided with information regarding their claims when those claims are denied.
Who is Exempt From ERISA?
An individual or employer is exempt from ERISA if they are self-employed or if they have a partnership where only themselves and their partner are covered by the plan. This is the case because no employees are covered under the plan.
What are Some of the Forms Required by ERISA?
Most likely, there will be forms from the IRS as well as the Department of Labor, which may include:
- IRS forms: If there is a welfare plan, an annual report must be filed with the IRS. Typically, all of the other forms required by the IRS for retirement plans do not have to be filed by welfare plans; and
- Department of labor forms: Welfare plans must file many different forms with the United States Department of Labor. Small welfare plans, however, are typically exempt from most of them.
It is important to note that welfare plans with fewer than 100 participants whose benefits are fully insured would be considered exempt. A welfare plan in which the benefits are paid from the employer’s general assets would also be exempt.
How is ERISA Compliance Encouraged?
ERISA compliance is encouraged by tax breaks as well as other incentives provided for employers. Failure to comply, on the other hand, may result in a loss of favorable tax treatment and other penalties.
Employers are aware of the possible penalties as well as the possibility of lawsuits. Administrators of these plans are required to file returns with the Department of Labor as well as the IRS and include details regarding the plans and any modifications which are made to them.
Do I Need an Employment Attorney for ERISA Violation Claims?
Ensuring that an employer is not in compliance with ERISA can be complex, especially if you file a claim against your employer for an ERICA violation. In addition, if you are an employer who is facing a claim for an ERISA violation, you may have to deal with a complicated process.
No matter which side of a violation claim you find yourself on, an experienced workers’ compensation lawyer can assist you with any issues, questions, or concerns you may have related to ERISA compliance. In addition, your lawyer can assist you before any legal issues arise by advising you of the ERISA requirements and helping to ensure you are in compliance.