What Is ERISA?

A big concern for many employees when starting a new job is whether they'll be able to put aside enough retirement savings. 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 employers on how to administer employee retirement benefits.

ERISA doesn't cover retirement plans by governmental entities. 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 keep an eye out 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). EBSA is a 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. This applies to pension plans, including defined benefit plans, compensation plans, welfare benefit plans, and 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 management and assets of the plan. Plan administrators or trustees are considered fiduciaries.

Fiduciaries must work solely for the benefit and in the best interest of plan participants. 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.

Legal Help

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. Reach out to an attorney near you today for more information. Moreover, if you're interested in learning more about pension plans and ERISA, visit FindLaw's ERISA FAQ page.