The Most Important Protection You Didn’t Know You Had

In 1974, ERISA, which stands for Employee Retirement Income Security Act, became the law to protect Employees from some unscrupulous practices from employers with regard to pension and welfare plans.

This Act was passed in response to indiscretions in the administration of certain large pension plans, in particular the Teamsters Pension Fund which had some dubious loans to casinos.

ERISA exists to protect employees and their beneficiaries, upholding any employer-sponsored plan. ERISA sets out rules that any qualified plans must follow to ensure that Plan Managers (fiduciaries) do not misuse the plan in anyway. Historically, unscrupulous employers treated employee retirement funds and health benefit payments as an asset to the company and abused these funds for their own personal gain.

ERISA has successfully put a stop to these practices and has secured these funds, protecting the rights of employees.

How Is ERISA Monitored?

Each plan must appoint a fiduciary. A fiduciary is a trustee that acts on behalf of the fund to manage assets. The Department of Labor provide rules and duties for fiduciaries disclosure and reporting, the IRS is responsible for the management and creation of participation fund and vesting (ownership) rules and the Pension Benefit Guaranty Corp is the guarantor or insurer of private pension funds. Any fiduciaries who do not follow the principles of conduct may be accountable for returning any losses to the plan.

The laws surrounding ERISA are very complex, and as such many businesses employ the services of an ERISA expert witness like Brucker & Morra to ensure compliance and secure assistance on designing, writing and executing their plans.

Which Plans Are Subject to ERISA?

Most employee plans fall under the terms of ERISA, however, there are some exceptions. ERISA does not cover retirement plans set up and maintained by government bodies and churches. Any companies that are set up outside of the United States, for non-resident employees, are exempt from ERISA.

Any other employee welfare benefits plans qualify for ERISA and must include the following:

  • medical care
  • sickness
  • accident
  • death
  • disability
  • unemployment
  • vacation
  • apprenticeship
  • daycare
  • scholarships
  • holiday
  • legal services
  • severance
  • housing

What Are the Rules of ERISA?

Employers are not required to offer benefits to their employees, but for those that do, they are required to provide the plan in writing in order to be compliant with ERISA.

ERISA is complex and includes the following standards:

  • Keeping participants informed of their rights
  • Creation of trust accounts for the safeguarding of any plan assets
  • Fiduciary responsibilities
  • Uniform vesting schedules
  • Depositing of contributions within timelines
  • The right for participants to sue for benefits and breaches of fiduciary duty
  • Guaranteed payment of certain benefits
  • Recordkeeping guidelines
  • Document filing guidelines
  • Appeals and grievance processes

Failure to Comply With ERISA

Penalties for failing to comply with the rules of ERISA will depend on the type of violation, and whether it is deemed that the violation is willful. Penalties may include fines, payments to plan participants and required changes to the company’s practices and procedures.

Fiduciaries who fail to comply with annual reporting requirements are also subject to a penalty of up to $1,000 per day, as well as personal liability for losses to plan participants and lost earnings or improperly received profits.

Author: Oliver Curtis

Hi there. I’m Oliver. I’m just a young boy from the outskirts of… Okay, that’s a lie, I’m not a young boy anymore, although I certainly feel that way at heart.