What Is ERISA?

ERISA is a federal law administered by the U.S. Department of Labor (DOL) that implements standards for private industry pension plans and welfare benefit plans. It plays an important role in protecting the retirement savings of millions of American workers and their beneficiaries.

Many employees worry about whether they'll be able to save enough for retirement when starting a new job. The Employee Retirement Income Security Act of 1974, also known as ERISA, is a federal law regulating employee benefit plans. The law provides guidelines to insurance companies and private sector employers on how to administer employee retirement benefits.

Ensure your plan assets are protected. Contact a local ERISA law attorney to learn more about ERISA compliance and how it can safeguard your retirement savings.

ERISA requires regular disclosure of retirement plan features and performance. It also sets minimum standards for vesting and funding. This allows participants to sue for breaches of fiduciary duty.

ERISA doesn't cover retirement plans by governmental entities or established by churches. It also doesn't cover plans that relate to state benefit laws, like workers' compensation. Although ERISA does not require private employers to have pension plans, it provides minimum standards for those that do.

Read on to learn more about ERISA and your rights when it comes to your employee retirement plan.

Why Was ERISA Enacted?

Before ERISA, the U.S. Department of Labor (DOL) started regulating employee benefit plans under the Welfare and Pension Plans Disclosure Act (WPPDA). The WPPDA required employers to provide plan descriptions and annual financial reports to the government and plan participants. The WPPDA also helped employees monitor for abuse or mismanagement of their retirement plan assets. But, the scope of the WPPDA was still very limited.

ERISA provisions apply to plan years starting on or after January 1, 1975. ERISA is administered by the Employee Benefits Security Administration (EBSA), which is part of the DOL. ERISA has broadened the scope of information available to plan participants.

It has also implemented a type of healthcare plan enforcement for health plans. This requires employers to manage funds exclusively for plan participants. They must also manage the plans in their employee's best interests. ERISA has also expanded reporting procedures to the government.

How Does ERISA Protect the Interests of Employees?

Under ERISA, providers are required to supply employees with plan documents and a summary plan description (SPD). The SPD summarizes the plan's key features and provisions. It must be clear and understandable. The SPD is an important communication tool between the plan administrator and the participant.

This applies to pension plans, including:

  • Defined benefit plans
  • Compensation plans
  • Welfare benefit plans
  • Employee stock ownership plans

The law requires plan administrators to notify participants on how to file a claim for benefits. ERISA also requires that employers make participants aware of the standards they must meet in order for their benefits to vest.

ERISA also protects employees from wrongdoing or breach of fiduciary duty by a plan fiduciary. A fiduciary is anyone who has authority over the plan's management and assets. Plan administrators or trustees are considered fiduciaries.

There are key fiduciary responsibilities to note. First, fiduciaries must work solely for the benefit and in the best interest of plan participants. Second, they must also be careful not to risk too much when investing an employee's retirement funds. If any improper planning results in a large loss for the employee, a fiduciary may be personally liable.

This provides employees more security against any abuses carried out in the management of their funds.

ERISA Amendments

There have been several amendments to ERISA over the years. These were enacted mostly to provide employees with more protections, whether it be for mental health issues or longer coverage.

One of the more important amendments includes the Consolidated Omnibus Budget Reconciliation Act (COBRA). While ERISA governs the administration of employee benefit plans, including health plans, COBRA addresses the issue of health coverage after job loss. COBRA ensures that employees have the option to maintain their health insurance for a temporary period if they lose their job.

Another amendment to ERISA is the Health Insurance Portability and Accountability Act (HIPAA). HIPAA sets standards for protecting sensitive health information. Because of HIPAA, an individual's medical data is kept confidential within the framework of ERISA-regulated health plans.

Lastly, there's the Affordable Care Act (ACA). The ACA primarily impacts ERISA by introducing new requirements for employer-sponsored health plans. ERISA plans must comply with various ACA provisions.

For instance, an ERISA health plan must provide coverage for preventative services without cost sharing. The ACA also requires that plan participants get certain plan documents, like a summary of benefits and coverage.

Get Legal Help Understanding ERISA

Understanding the complexities of ERISA plans can be daunting. An experienced ERISA law attorney can help. They can offer legal advice related to workplace regulations and your ERISA plan. Contact an attorney near you today for more information.

Was this helpful?

Can I Solve This on My Own or Do I Need an Attorney?

  • Some employment legal issues can be solved without an attorney
  • Complex employment law cases (such as harassment or discrimination) need the help of an attorney to protect your interests

Legal cases for wage and benefit issues, whistleblower actions, or workplace safety can be complicated and slow. An attorney can offer tailored advice and help prevent common mistakes.

Find a local attorney