Employee Retirement Income Security Act (ERISA) -- Employee Law

What Is ERISA (Employee Retirement Income Security Act)?

The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for most voluntarily established pension and health plans in private industry to provide protection for individuals in these plans.

ERISA requires plans to provide participants with plan information including important information about plan features and funding; provides fiduciary responsibilities for those who manage and control plan assets; requires plans to establish a grievance and appeals process for participants to get benefits from their plans; and gives participants the right to sue for benefits and breaches of fiduciary duty.

There have been a number of amendments to ERISA, expanding the protections available to health benefit plan participants and beneficiaries. One important amendment, the Consolidated Omnibus Budget Reconciliation Act (COBRA), provides some workers and their families with the right to continue their health coverage for a limited time after certain events, such as the loss of a job. Another amendment to ERISA is the Health Insurance Portability and Accountability Act (HIPAA) which provides important new protections for working Americans and their families who have preexisting medical conditions or might otherwise suffer discrimination in health coverage based on factors that relate to an individual's health. Other important amendments include the Newborns' and Mothers' Health Protection Act, the Mental Health Parity Act, and the Women's Health and Cancer Rights Act.

In general, ERISA does not cover group health plans established or maintained by governmental entities, churches for their employees, or plans which are maintained solely to comply with applicable workers compensation, unemployment, or disability laws. ERISA also does not cover plans maintained outside the United States primarily for the benefit of nonresident aliens or unfunded excess benefit plans.

What Happens to My Retirement Plan if My Company Goes Bankrupt?

According to the Employee Retirement Income Security Act of 1974 (ERISA), your employer sponsored retirement account should be safe even if the employer declares bankruptcy. ERISA requires that retirement accounts be fully funded and kept in an account that is separate from the employer’s other business accounts. Thus, retirement funds should be secure from a company’s creditors and continue to belong to individual employees.

It is important to know, however, that it is possible that the retirement plan will be terminated in a bankruptcy and that no future contributions will be made to the plan. If that happens then the employee is entitled to 100% of the money in the retirement account regardless of the amount of time that the employee has been working for the employer. Therefore, the employee is entitled to the money in the account even if he or she would not have been entitled to the money if he or she were to leave the job voluntarily. An employee may, however, incur tax penalties for the early distribution of the funds prior to retirement age. Employees should consult with their tax advisors and financial professionals in order to determine how best to handle the situation.

Who Is Covered By The Employee Retirement Income Security Act (ERISA)?

Any employee benefit plan established or maintained by any employer, employee organization or organization representing employees engaged in commerce or in any industry or activity affecting commerce is covered by the Employee Retirement Income Security Act (ERISA). ERISA does not apply to government plans or tax­exempt church plans as defined by the Act. Also exempt are plans maintained solely for the purpose of complying with workers compensation, unemployment or disability insurance laws or those maintained outside of the U.S. primarily for the benefit of persons substantially all of whom are nonresident aliens. If a plan is an excess benefit, providing benefits or contributions in excess of those allowable for tax qualified plans, it is exempt from ERISA.

Will I Know if My Retirement Plan is in Trouble?

Yes, if your plan administrator is acting according to the requirements of the Employee Retirement Income Security Act of 1974 (ERISA) then you should know if your retirement is in trouble. Employers are required to provide plan participants and beneficiaries with a Notice of Significant Reduction in Future Benefit Accruals and with a Notice of Failure to Meet Minimum Funding Standards within a reasonable amount of time. Plan administrators are also required to provide other important periodic statements to participants and beneficiaries. Therefore, you should know when your retirement plan is in trouble.

What Administrative Body May Impose Remedies For A Violation Of The Employee Retirement Income Security Act?

ERISA has designated the Secretary of Labor broad powers to investigate and determine violations and impose remedies. The Secretary of Labor, plan participants, beneficiaries or fiduciaries, can bring ERISA actions to U.S. District Courts. Criminal prosecutions may be brought against persons who willfully violate the Act.

What Does The Employee Retirement Income Security Act (ERISA) Govern?

The Employee Retirement Income Security Act (ERISA) was passed to protect the interest of participants in employee benefit plans and their beneficiaries through disclosure and reporting requirements, and the establishment of certain fiduciary standards of conduct, responsibility, and obligations.