Private employers often have wide discretion in how they choose to provide or not provide retirement benefits to their employees. However, while employers are generally not required to provide retirement programs for employees, approximately 70% of employees in America have some sort of retirement package available to them. Knowing the details of your plan is important as the rights and benefits available vary widely between retirement programs.
Employee Benefit Programs
An employee is often eligible for a wide variety of benefits programs that come with their employment. Some benefits may be fully covered by the employer, while others may require the employee to contribute payments as well. Employers have a duty to fully explain the details of benefit packages including if there are any special qualifications required for the employee to qualify (i.e. must work for the company at least 10 years to receive a pension).
- Health, Medical, Dental or Mental Health Plans: Employers that choose to provide healthcare benefits have certain duties to their employees. Employers must provide: a full disclosure of important plan information, timely and fair processing of benefit claims, the choice to temporarily continue group health coverage after losing coverage, a certificate evidencing health coverage under a plan, and a recovery of benefits due under the plan.
- COBRA: Under the federal "COBRA" law, employees may be eligible for continuation of their health insurance benefits whether they quit or were fired. This law applies to employers with 20 or more employees and allows health coverage to be extended for up to 18 months. Covered employers are required to inform departing employees of their eligibility for continuing coverage. The employee must pay the cost of continued coverage.
Employee Pension Programs
A pension is a fund that is created during an employee’s working years, which provides payments to the employee after their retirement. There are two primary types of employee pensions:
- Defined Benefit Plan: A defined benefit plan provides fixed payments to an employee after they retire based on a set formula. The formula can vary depending on the employer, however, often it will include:
- the employee’s salary,
- years of employment,
- age at retirement, and
- other benefits depending on the plan.
- Defined Contribution Plan: This type of pension involves making contributions to an individual retirement account for the employee that is then invested. The returns on the investment are then credited to the account and become available to the employee after retirement. The contributions can be from the employer, the employee’s own deferred wages or both. Generally, the employee has control over the investment decisions for the retirement account and therefore bears the risks of any bad investments.
Who Can Participate in the Employee Pension and Benefit Plan?
Federal law allows employers to exclude some employees from retirement plans. For example, an employer can reserve retirement benefits exclusively for salaried employees.
To qualify for a pension program, employees must generally wait for their rights to the plan to vest. Rights usually vest when an employee has worked five to ten years with the same employer. An employee can lose the rights to the pension if they leave the job before the rights have vested.
Once the pension has vested and the employee has a right to the retirement benefit, the employee usually has the choice to either leave the funds for retirement or to withdraw them early. However, withdrawing retirement funds early often results in severe tax penalties.
Protection of Employee Pension and Benefit Plans
The Employee Retirement Income Security Act (ERISA) was created to monitor health plans and pensions offered by private employers. Specifically, ERISA provides protections to health plan recipients and beneficiaries by requiring employers to maintain and manage plans appropriately. ERISA ensures compliance through monitoring and prosecution of violators and empowers plan members and beneficiaries to file claims for ERISA violations when necessary.
Do I Need an Experienced Pension and Benefits Attorney?
Employee benefit and retirement plans can be extremely complicated, as are the regulations that govern them. An experienced employment lawyer can assist an employer in creating a pension plan that complies with federal regulations such as ERISA. In addition, if you are an employee that has been denied benefits owed to you, consulting an employment lawyer can help you identify if you have a claim for damages.