ABCs of Employment Law: ERISA
The Employee Retirement Income Security Act (ERISA) is one of our main areas of focus at Walcheske & Luzi. Our team of attorneys are committed to protecting the welfare of our clients, especially when it comes to the crucial matters of employee benefits plans. We broke down the purpose of ERISA, the types of plans it covers, and common disputes that may arise to ensure that you understand your rights when it comes to employee benefits.
A Brief History of ERISA
ERISA was enacted in 1974 in response to financial and legal crises in the 1960s and 1970s, such as the Studebaker-Packard bankruptcies. Employees were losing retirement savings because of employers going bankrupt or mismanaging pension funds. ERISA was established to address these issues with a set of regulations to protect employee rights and interests. ERISA helps ensure that retirement and health benefits are secure, and it imposes specific responsibilities on employers and plan administrators to manage benefits fairly and transparently. Amendments to ERISA offer additional plan protections, with one of the most important amendments being the Consolidated Omnibus Budget Reconciliation Act (COBRA). COBRA protects the health coverage of some employees and their dependents for a limited time following an event such as the loss of a job.
ERISA and Employee Benefits Protection
ERISA serves as a vital framework for protecting employee benefits by imposing fiduciary duties on those who manage and administer employee benefit plans. Here is how ERISA protects employees:
- Reporting and Disclosure: ERISA requires plan administrators to provide participants with information about the plan’s features, funding, and investments, so that employees are well-informed about their benefits.
- Fiduciary Responsibilities: Plan administrators and trustees are held to high standards of care and loyalty in managing benefit plans. They must act in the best interests of participants and beneficiaries, diversify plan investments, and avoid conflicts of interest.
- Vesting and Participation Requirements: ERISA sets standards for when employees become eligible to participate in a benefit plan and when their rights to those benefits vest. This protects employees from being denied benefits they’re entitled to.
- Plan Funding and Benefit Security: ERISA places guidelines on how benefit plans are funded and maintained to secure participants’ benefits, even in the event of an employer’s financial instability.
Types of Plans Covered by ERISA
ERISA applies to a wide range of employee benefit plans. Some of the most common ones include:
- Retirement: ERISA covers pension plans, 401(k) plans, and other retirement savings plans offered by employers.
- Health: ERISA extends to health insurance and healthcare plans provided by employers. This includes group health plans, dental and vision plans, and other forms of health benefits.
- Disability: ERISA regulations also apply to short-term and long-term disability plans, providing employees with financial support in case they are unable to work due to a disability.
- Life Insurance: Employee-provided life insurance plans must adhere to ERISA requirements, protecting beneficiaries in case of an employee death.
Common Disputes and Challenges
While ERISA is designed to protect employee benefits, disputes and challenges can still arise in the following areas:
- Denial of Benefits: Employees may encounter problems when their claims for benefits are denied. These disputes often involve disagreements regarding plan interpretation or medical necessity.
- Fiduciary Mismanagement: Plan administrators or trustees may breach their fiduciary duties, resulting in disputes related to mismanagement or self-dealing.
- Reporting and Disclosure Issues: Failure to provide adequate information to plan participants can lead to disputes related to the adequacy or reporting and disclosure.
- Procedural Errors: Disputes can also arise due to administrative errors in processing benefit claims or in handling benefit plans.
Have more questions about ERISA, or need an attorney on your side? Contact Walcheske & Luzi today to schedule a consultation.