CHAPTER NINETEEN

Employment Retirement Security Act

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Myths About ERISA

1. Your pension plans are not protected against the trustees who administer them

2. If you put money into a retirement plan, it will be there when you retire

3. If you put money into a retirement plan, it will not be there when you retire

4. ERISA applies only to retirement or pension funds

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Statutory Basis

Employee Retirement Income Security Act allows for civil action by participants or beneficiaries to recover benefits or enforce rights under the terms of his or her plan

It prohibits interference with those rights protected under such plans

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Who is Covered

Any employer that offers welfare benefit plans to its employees is covered by ERISA

Most private sector plans are covered

Generally, plans maintained by governmental entities or churches are not covered

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Types of Plans to Which ERISA Applies

ERISA covers employee benefit plans– Welfare plans– Pension plans

Defined benefit contribution plans Defined benefit plans

Qualified plans must be permanent, in writing and communicated, must have assets held in trust, and must exclusively benefit employees and beneficiaries

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ERISA Regulations

Reporting and disclosure– Summary plan descriptions– Annual reports

Fiduciary duty– Fiduciary is one who holds funds in

trust for another– Must handle funds in best interests of

participants

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Eligibility and vesting rules– All employees over 21 and with one

year of employment are eligible– Vesting is acquiring a right or interest

that is irrevocable by the donor Employees vested after 5 – 7 years

Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA)– Allows temporary continuation of health

care coverage– Covers retrieval of pension funds by

employers

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Health Insurance Portability and Accountability Act (HIPAA)– Limits preexisting exclusions in health

care plans– Protects individual health information

from inappropriate use Funding requirements of defined

benefit plans are set forth under ERISA

Also covers modification of existing retirement plans

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Enforcement of ERISA

Enforced by Department of Labor and Internal Revenue Service

Plaintiffs may only file for relief under ERISA– State common-law claims are

preempted Some ERISA claims may also be

violations of ADEA

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Management Considerations

Don’t assume compliance; maintain consistent review

Although retirement fund opportunities are not required, they are subject to ERISA if offered

Be careful of matching employee contributions with company stock

Stay abreast of changing legislation