Employee Retirement Income Security Act

The Employee Retirement Income Security Act (ERISA) was enacted in 1974. The act does not require that an employer offer any particular benefits to employees, but instead governs how employee benefit and welfare programs, once offered by an employer, must be managed. In essence, an employer who decides to provide employees with "funded" benefits or who requires contributions from employees assumes a host of new responsibilities under the law. ERISA is jointly administered by the Employee Benefits Security Administration of the Department of Labor and the Internal Revenue Service, and applies to pension plans, health insurance, disability benefits, death benefits, pre-paid legal services, vacation benefits, day care centers, scholarship funds, apprenticeships, and training benefits, where offered by an employer.

ERISA requires that an employer or administrator of a qualified benefits plan manage the plan for the exclusive benefit of participants and beneficiaries (such as employees and their families), avoid conflicts of interest, and provide the benefits promised by such plans. Transactions between the plan and any "party in interest," such as the employer or someone who is in the position to exercise improper influence over the plan, are prohibited. For example, an employer or officer in the company may not take a loan from (or guarantee a loan with) employees' pension funds. An employer who engages in such prohibited transactions may be fined up to the full amount of the money involved in the transaction.

The law also includes detailed notice and reporting requirements. The employer or administrator (such as a pension investment provider or insurance company) must furnish participants and beneficiaries with a summary plan description, describing, in understandable terms, their rights, benefits, and responsibilities under the plan. The employer or administrator must also furnish a description of any material changes to such a plan. Furthermore, the administrator must file an annual report with the Department of Labor disclosing financial details and information concerning the operation of any such plan. An employer or administrator who fails to file the required reports or is late in doing so may be fined up to $1000 per day.

Finally, ERISA contains deadlines by which an employer or administrator must rule on a claim under the plan. For example, once a participant files a claim, the plan has ninety days to inform the participant whether the claim is accepted or denied. If the claim is denied, the plan must tell the participant how to submit the denial for a full and fair review, and must give the participant sixty days to do so. Once the participant submits a request for review, the plan must review the denial and make a decision within 60 days (in some cases, 120 days).

How Employment Law Attorneys Can Help Employers

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How Employment Law Attorneys Can Help Employers

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