Erisa Law FAQS

 

ERISA LAW

FREQUENTLY ASKED QUESTIONS

 

. Does an employer have legal obligations with respect to employee pension plans?

. What pension plans are covered under ERISA?

. What is a fiduciary?

. What is a beneficiary?

. What are an employer’s obligations with respect to employee pension plans?

. Does anyone else have fiduciary or other obligations with respect to employee pension plans?

. What can I do if my employer has breached its fiduciary duties?

. What steps can I take to seek recovery?

Does an employer have legal obligations with respect to employee pension plans?

Yes.
The Employee Retirement Income Security Act of 1974 (“ERISA”) imposes
obligations on employers who control or administer their employees’
pension plans. This is because an employer is generally a fiduciary,
with the authority to control and manage the operation and
administration of the plan.

ERISA
sets minimum standards for the administration of plans and the
investment of plan assets. It does not require employers to offer a
certain level of benefits to its employees, or to offer employees any
benefits at all. For this reason, the language of the plan document is
often determinative. It is therefore extremely important to know what
your plan says, and to insist on seeing a copy of the plan document
yourself, rather than simply relying on assurances by your employer or
your employer’s representatives.

What pension plans are covered under ERISA?

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.

Most
private employer-sponsored pension plans fall within the scope of this
definition. Plans and benefits that do not fall within this definition
include government employee pension plans, vacation pay, health club
benefits, family leave, and workers’ compensation.

What is a fiduciary?

A
fiduciary is a person or entity with special obligations arising from
the relationship of trust between the fiduciary and the beneficiary.
The fiduciary holds rights that would normally belong to another
person, and is therefore held to a high standard of care in the
exercise of those rights.
An employer is a fiduciary with respect
to an employee pension plan if the employer is named as a fiduciary in
the plan, or if the employer exercises “any discretionary authority or
discretionary control respecting management of such plan or exercises
any authority or control respecting management or disposition of its
assets” or has “any discretionary authority or discretionary
responsibility in the administration of such plan.”
Most employers are fiduciaries with respect to pension plans that they
have established or that they maintain. We use the term “employer” in
the questions below to mean an employer who is a fiduciary with respect
to a pension plan.

What is a beneficiary?

A
participant is any employee or former employee of an employer who is or
may become eligible to receive a benefit of any type from that
employer’s employee benefit plan. A beneficiary is a person designated
by a participant or by the terms of a plan who is or may become
entitled to a benefit under the plan.

A
person can be both a participant and a beneficiary. Participants and
beneficiaries can assert their rights under ERISA against fiduciaries
who do not comply with the required standard of care.

What are an employer’s obligations with respect to employee pension plans?

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
participants. 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.

Does anyone else have fiduciary or other obligations with respect to employee pension plans?

ERISA
also imposes fiduciary obligations on anyone who renders investment
advice for a fee or other compensation, or who has any authority or
responsibility to render such advice, with respect to any pension plan
money or property.

In
addition, in certain circumstances, some service providers to the
pension plan (such as attorneys, accountants, actuaries, etc.) may be
liable to the plan and/or its participants for professional negligence.

What can I do if my employer has breached its fiduciary duties?

You
should first seek recourse from the internal claim and review procedure
provided under your plan. Plans are required to have an internal
procedure by which participants may bring and appeal disputed claims.
Many courts have held that participants must exhaust this internal
procedure before filing a lawsuit. It is a good idea to consult an
attorney even in this internal procedure to ensure that you act in a
timely fashion to preserve all your rights and remedies under your plan
and the applicable state and federal laws, including ERISA.

An
attorney can help ensure that you submit all possible evidence in
support of your position while evidence is fresh and more easily
accessible, and so that the evidence becomes part of the record of your
claim. An attorney can also help advise you of the relevant deadlines,
which may come quickly – for example, many plans require you to appeal
the denial of a claim within 60 days of the denial. An attorney can
also tell you whether your claim is exempt from the internal claim and
review procedure, in which case you may decide to file a lawsuit.

When
internal procedures are insufficient to resolve a claim, or when a
claim is not subject to internal procedures, ERISA gives plan
participants and beneficiaries the right to sue fiduciaries for
breaches of their obligations. Again, important deadlines apply, so
time is of the essence.
The right to sue must be exercised within
six years of the employer’s breach, or within three years of the
employee’s actual knowledge of the breach. A breach can involve an
overt act by an Employer, or an omission – that is, a failure to act
when action was required.

An
employer may be liable under ERISA for any losses to the plan resulting
from each breach of its fiduciary obligations. The employer must
restore to the plan any profits the employer made through use of the
plan’s assets and must provide any other relief that a court deems
appropriate in light of the violation.

What steps can I take to seek recovery?

First,
be wary of relying on promises or assurances given to you about your
benefits or pension plan by your employer, plan administrator,
insurance representative, or anyone else who is not properly qualified
to offer legal advice. Many times employees will rely on such
representations only to find out later that these representations
conflict with the language of the plan.

The
language of the plan is legally binding, while representations, even by
persons in positions of authority, generally are not binding and not
enforceable. Always check the language of the plan and, if you have any
questions or doubt about its provisions, consult with an attorney.

You
can also seek answers to certain questions from your local office or
the website of relevant government agencies including the Department of
Labor (www.dol.gov), the Pension Benefit Corporation (www.pbgc.gov),
and the IRS (www.irs.gov).

If
you believe that you have suffered a loss because your employer
breached its obligations with respect to a pension plan of which you
are a participant or a beneficiary, you should contact an attorney as
soon as possible. An attorney can help ensure that you are aware of the
available legal remedies and applicable deadlines, and that you act in
a timely fashion to preserve your rights.

 

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