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ERISA: Protection for Employee Pension and Benefit Plans

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What Is ERISA?

ERISA is the acronym for The Employee Retirement Income Security Act and was enacted by the 93rd United States Congress on September 2, 1974. Designed to provide pension reform, the act is a federal law that sets standards and regulations of protection for individuals that are in private sector company retirement plans. ERISA requires the set plans to provide employees with accurate plan information, and important facts about:

  • Plan features and funding
  • Minimum standards required for participation
  • Vesting
  • Benefit accrual
  • Management and control features
  • Claims and appeals process for participants
  • Right to sue for benefits that are breached

An employer is usually called the fiduciary that has to follow the plan guidelines while the employee is called the qualified beneficiary.

Who Oversees Employee Pension and Benefit Plans?

ERISA establishes minimum standards of vesting, funding, and fiduciary relationships and a system of compulsory benefit insurance to protect the security of pension rights. Specifically, ERISA protects pension and benefit plan recipients and beneficiaries. 

What Types of Benefits Plans Are Included in ERISA?

ERISA defines three main types of benefits plans: 

  • Employee benefit plans: benefit plans that are voluntarily established and managed by an employer, an employee organization, or both.
  • Pension plans: are benefit plans established to provide employees with retirement income, or income after termination of employment.
  • Welfare plans: employee benefits plans designed to provide employees with benefits covering issues such as health, death, disability, vacation, legal help, day care, scholarships, training, and other benefits of this nature.

Plans Not Included

ERISA specifically does not cover employment plans:

  • Established by churches
  • Established by the government
  • For employees working outside the United States (non-citizens)

What Protections Does ERISA Provide?

There are three main protections provided by ERISA:

  • Eligibility Guidelines: an employee aged 21 or over who has worked at least 12 months for the employer must be offered access to any pension or benefit plan in place.
  • Management of Funds: an employer is liable and subject to prosecution for mismanagement of benefit funds
  • Wrongful Termination: an employee cannot be fired to prevent eligibility for benefit plans.

How Is Compliance Monitored?

Compliance with ERISA is monitored through a series of reporting requirements. Failure to comply is a violation subject to civil liability and criminal penalties  including costly DOL penalties. Employees can also bring bad faith claims against their employers who deny them benefits that they are entitled to under ERISA.

How Is Compliance Encouraged?

Companies that comply with ERISA are offered tax breaks and incentives which encourage employers to follow ERISA guidelines. Failure to comply will result in loss of favorable tax treatment and other penalties.

How Can an Employment Lawyer Help?

If you believe your employer has acted improperly with regard to your benefits or pension, an employment lawyer can help you resolve the dispute and make sure you receive the benefits you are entitled to.  If you are an employer and are concerned about ERISA compliance, an employment attorney can help you establish a benefit plan that protects you and your employees.

Photo of page author Kourosh Akhbari

, LegalMatch Legal Writer

Last Modified: 03-06-2018 03:25 AM PST

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