Employee Retirement Income Security Act (ERISA)
The Employee Retirement Income Security Act sets uniform minimum standards for establishing employee benefit programs in a fair and financially sound manner. ERISA does not require employers to provide benefits outside those required by other laws, such as workers' compensation, unemployment insurance, or disability insurance. However, once a plan is established, ERISA imposes high standards of fiduciary duty on plan administrators. These duties include the requirement that all decisions concerning the plan are made solely in the best interests of the plan participants, that the decision-maker exercise the diligence and care of a "prudent person" given all circumstances, and that the only purpose of the plan is to provide benefits to the participants. These duties obligate the plan administrator to fully inform and provide complete information to plan participants. (See Krohn v. Huron Memorial Hospital, 173 F.3d 542 (6th Circuit, 1999)).
Typically, ERISA coverage includes pension plans, 401(k) plans, health benefits, life insurance, and other employment benefits. Federal courts very broadly construe the statute to encompass most non-monetary employer-provided benefits. Causes of action to enforce rights for ERISA benefits must be brought in federal courts. If an ERISA action is brought in a state court, it will be removed to federal court.
Employers must provide any benefits they promise. Employers must provide participants with a summary plan description. This document must explain, in understandable terms, the participant's rights, benefits and responsibilities under the plan. Administrators are also required to file annual reports that include financial information and other information concerning the operation of the plan.
Plan administrators have certain duties and responsibilities. The plan administrator manages the plan for the exclusive benefit of participants and beneficiaries. The administrator carries out her duties in a prudent manner and must refrain from conflict-of-interest transactions. The administrator must comply with limitations on certain plans' investments in employer securities and properties and must fund benefits in accordance with the law and plan rules. The administrator should report and disclose information on the operations and financial condition of the plans to the government and participants and provide documents required in the conduct of investigations to assure compliance with the law.
- Plans established or maintained by governmental entities or churches are exempt from ERISA.
- Plans maintained solely to comply with workers' compensation, unemployment, or disability laws are exempt from ERISA.
- Plans maintained outside the United States primarily for the benefit of nonresident aliens are exempt from ERISA.
- Pension Plans
- Provide retirement income, or
- Defer income until termination of the covered employee or beyond.
- Welfare Plans
- Provide a variety of benefits.
- Typical benefits include some or all of the following:
- Retirement benefits.
- Health benefits.
- Disability benefits.
- Death benefits.
- Prepaid legal services.
- Vacation benefits.
- Day care centers.
- Scholarship funds.
- Apprenticeship and training benefits.
Filing Requirements and Limitations:
- A participant must first exhaust all internal remedies of the plan unless doing so would be futile. Before determining that doing so would be futile, consult an attorney.
- After all internal procedures are exhausted, a claim may be filed under ERISA's civil enforcement provisions.
- There is no statute of limitations written into ERISA, so courts look to state law for a similar cause of action and use its statute of limitations.
Remedies and Damages:
- Types of Relief
- Recover benefits due and enforce rights under the plan.
- Get access to plan documents to which access had been previously requested in writing. If the plan administrator fails to honor the request within 30 days, the court may find the administrator personally liable for up to $100 a day, unless failure to comply is due to circumstances beyond her control.
- Clarify rights to future benefits.
- Order the employer to cease any action that violates the terms of the plan.
- Order the employer to cease any action that violates provisions of ERISA, such as reporting and disclosure, participation, vesting, and funding provisions.
- Order the employer to provide a statement of vested benefits upon termination.
- Attorney's Fees
- The court may choose to award attorney's fees to the prevailing, or winning, party.