Erisa Law

THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974 (ERISA)

 

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.

A
pension plan is governed by ERISA if it is a plan, fund, or program
established or maintained by an employer (or an employee organization,
or both) that, either explicitly or because of surrounding
circumstances, (1) provides retirement income to employees or (2)
results in a deferral of income by employees until after termination of
covered employment or beyond.

As
a fiduciary, an employer must discharge his or her duties with respect
to a pension plan solely in the interest of the plan’s participants and
beneficiaries and for the exclusive purpose of providing benefits to
participants and their beneficiaries. In other words, an employer who
is a fiduciary must administer pension plans and invest plan assets
solely for the benefit of the plan’s participants and beneficiaries,
and not for any other reason, including any other business purpose or
the company’s bottom line. 

An
employer who is a fiduciary has a duty of loyalty to plan participants
and beneficiaries. An employer-fiduciary also must not conceal any
breaches of responsibility by any other fiduciaries of the plan. 

An
employer who is a fiduciary also has a duty of prudence. This means
that the employer-fiduciary must act with care, skill, prudence, and
diligence with respect to a pension plan; must diversify investments;
and must act in accordance with the provisions of the plan itself. This
includes ensuring that the plan is properly funded and has sufficient
assets to satisfy its accumulated benefit obligations.

An
employer who is a fiduciary has a duty not to engage in self-dealing.
Transactions between a plan and a party in interest are prohibited, and
an employer that sponsors a plan is a party in interest. In the absence
of a specific exemption, transactions between the employer and the plan
constitute breaches of the employer’s fiduciary duty.

An
employer who is a plan administrator also has a duty to inform. This
means that such an employer must provide employees adequate, accurate,
and understandable information about the plan’s provisions, benefits,
and source of funding, including any changes to this information.

Providing
misleading or incomplete information violates this obligation. As part
of the employer’s duty to inform, every plan participant has the
following rights:

? The right to obtain a copy of the plan document from the plan administrator.

?
The right to receive a summary plan description (SPD) upon joining the
plan and at specified intervals thereafter. The SPD is a description of
the plan’s terms that is (or should be) in language that is
understandable.

? The right to obtain a copy of the plan’s most recent annual statement (Form 5500).

You must request these documents from the plan administrator in
writing, and the plan administrator has 30 days from the receipt of
your request to respond.

 


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