Employee Retirement Income Security Act of 1974


Finally, if the third-party administrator fails to provide the four-page summaries, the plan will be out of compliance and subject to penalties, as required under the healthcare reform law, despite its arrangement with the third-party administrator. Institution of termination proceedings by the corporation. Pension benefit guaranty funds. Covered participants but not beneficiaries Under the literal language of ERISA, an SPD must be furnished to each participant and to each beneficiary receiving benefits under the plan.

How Many Plans

It is relatively simple to establish a plan, fund or program—any ongoing administrative scheme will satisfy this condition although numerous court cases apply some fine distinctions when determining whether very simple plans, especially simple severance plans, have the necessary ongoing scheme. Showing that an employer maintains a plan is also straightforward—any contribution by the employer toward payment of benefits or administration of the plan is substantial including a contribution toward insurance coverage.

There are important statutory exemptions and regulatory safe harbors carving out plans that might otherwise fall within the ERISA plan definition. Also exempt are programs maintained solely to comply with state-law requirements for workers' compensation, unemployment compensation, or disability insurance, as are plans maintained outside the United States for nonresident aliens. Several important regulatory exemptions apply as well.

The key to this payroll-practice exemption: Under such an arrangement, the employer allows an insurance company to sell voluntary policies to interested employees who pay the full cost of the coverage. The exemption permits employees to pay their premiums through payroll deductions and permits the employer to forward the deductions to the insurer.

However, the employer may not contribute toward coverage and the insurer may not pay the employer for being allowed into the workplace. In other words, the insurance company, not the employer, must be the entity offering the plan. Among the activities identified as relevant by the many court cases interpreting this exemption are the following: ERISA does not require an employer to provide employee benefits.

Likewise, as a general rule, it does not require that plans provide a minimum level of benefits. Employers-sponsors are generally free to design their own benefits plans. As mentioned above, ERISA specifically requires that an employee benefit plan, including a welfare benefit plan, be established in writing.

Many employers fail to consider the requirements of having a written plan document, or mistakenly assume that written insurance policies or other booklets or summaries provided by the insurance company are sufficient to meet this document requirement. Of course insurer documents should comply with all applicable legal requirements; insurers must provide adequate disclosures and notices, and must follow federal and state compliant claims procedures and applicable HIPAA regulations.

Further, insurers assume responsibility only in regards to problems with insufficiency or inconsistency, or compliance failure with state regulations, not ERISA regulations. Most policies, certificates, summaries and other documentation produced and distributed by an insurer generally specify that the employer is the plan sponsor, plan administrator, agent for service of process, and the named fiduciary.

In sum, it is the employer who is held accountable for any plan failures or compliance issues. Given that the employer-sponsor typically is the plan administrator, it follows that the employer not the insurer generally is responsible for furnishing Summary Plan Descriptions SPDs , and that the employer will be held liable if adequate SPDs are lacking.

Of course insurance carriers are responsible for paying claims. Yet, as mentioned above, many employers mistakenly assume that carriers also provide SPDs. Instead, even when an insurer provides booklets describing benefits for distribution to participants, the insurer generally does not assume the statutory responsibility for SPDs. The Department of Labor DOL has authority, however, to exempt any welfare benefit plan from all or part of the reporting and disclosure requirements.

Under DOL regulations, the plan administrator of a welfare benefit plan is required to furnish SPDs and SMMs to participants covered under the plan only, and not to beneficiaries. Because the definition is not limited to current employees, it can include COBRA qualified beneficiaries, covered retirees, and other former employees who may remain eligible under a plan.

At least one court has determined that SPDs need not be distributed to employees before they join a plan. Provided that they all live at the same address, it appears that the SPD may be furnished, for example, to the covered employee on behalf of other qualified beneficiaries in the same family unit or to the spouse who elects COBRA coverage for children in the same family unit. Generally, the SPD should be furnished to the custodial parent or guardian of a minor child.

Despite the regulatory carve-out for beneficiaries as noted above, the spirit of the disclosure obligation suggests that, where there is no participant to receive an SPD, the document should be furnished to the persons who remain entitled to plan benefits. Thus, plan administrators should adopt a practice of furnishing SPDs and SMMs to spouses or other dependents of a deceased participant who continue to receive benefits after the participant's death e.

Under case law, SPDs and SMMs should be provided to a representative or guardian when the plan is on notice that the participant or other person entitled to an SPD is incapacitated.

Even though an SPD technically is not required until an employee is covered by a plan, some employers provide SPDs along with necessary enrollment forms to employees who are eligible to enroll in a plan, when enrollment is necessary in order to be covered by the plan. Regardless of whether SPDs are furnished to eligible employees before they enroll, it is essential that these employees receive some kind of effective notice that active enrollment and payment of premiums is a condition of receiving benefits under the plan.

If non-SPD enrollment materials are used for this purpose, the enrollment materials should contain information about where to obtain an SPD. There are no initial penalties for failure to prepare or distribute a required SPD, unlike the case with Form reporting failures. Instead, repercussions from failing to have an adequate SPD arise when participants and beneficiaries sue to enforce plan rights.

An inadequate SPD for example, one that conflicts with the plan document it seeks to summarize will normally be enforced by the courts in lieu of the underlying plan document, if doing so will favor the participant or beneficiary involved. In sum, without an adequate SPD in place employers can end up being liable for benefits they never intended to provide.

The courts have been relatively protective of the right of participants and beneficiaries to receive adequate SPDs. Even if benefits are improperly denied, the insurance company cannot be sued for any resulting injury or wrongful death, regardless of whether it acted in bad faith in denying benefits.

Insurers operating ERISA plans enjoy several immunities not available to other types of insurance companies. ERISA preempts all conflicting state laws, including state statutes prohibiting unfair claims practices and causes of action arising under state common law for insurance bad faith.

It has been argued that in the case of health benefits, the effect of all of this may paradoxically have been to leave plan participants worse off than if ERISA had not been enacted. Many persons included among the some 29 million people presently without health care coverage in the United States are former ERISA "subscribers", insurance terminology for Plan beneficiaries, who have been denied benefits-usually on the ground that the prescribed care is not medically necessary or is "experimental"-or dropped from coverage, often because they have lost their jobs due to the very illness for which care was denied.

The exemption also freezes the law in its original form, meaning the Hawaii legislature is not able to make non-administrative amendments without Congressional approval. Title I protects employees' rights to their benefits. The following are some of the ways in which it achieves that goal:. Plan fiduciaries and plan participants may also bring certain civil causes of action in Federal Court. Phyllis Borzi , who was confirmed on July 10, [1]. Past Assistant Secretaries include the Hon.

Campbell , the Hon. Combs and the Hon. It also created the Joint Board for the Enrollment of Actuaries , which licenses actuaries to perform a variety of actuarial tasks required of pension plans under ERISA. The Joint Board administers two examinations to prospective Enrolled Actuaries.

After an individual passes the two exams and completes sufficient relevant professional experience, she or he becomes an Enrolled Actuary.

It also describes the procedures that a pension plan must follow to terminate itself, and for the PBGC to initiate an involuntary termination. An employer may terminate a single-employer plan under a standard termination if the plan's assets equal or exceed its liabilities. If the assets are less than the liabilities, the employer must contribute the amount necessary to fully fund the plan.

A standard termination is sometimes referred to as a voluntary termination because the employer has chosen to terminate the plan. The plan must purchase annuity contracts for all participants. If the plan permits the payment of lump sums, employees may be offered the choice of a lump sum payment or an annuity. If any assets remain in the plan after a standard termination has been completed, the provisions of the plan control their treatment. In some plans, the excess assets revert to the employer; in other plans, the excess assets must be used to increase participants' benefits.

An employer may terminate a single-employer plan under a distress termination if the employer demonstrates to the PBGC that one of these conditions exists:. If the PBGC finds that a distress termination is appropriate, the plan's liabilities are calculated and compared with its assets.

Depending on the difference between the two values, the termination may be treated as if it had been a standard termination or as if it had been initiated by the PBGC. PBGC may initiate proceedings to terminate a single-employer plan if it determines one of the following:.

The benefits paid by the PBGC after a plan termination may be less than those promised by the employer. See Pension Benefit Guaranty Corporation for details. Now, most pension plans have the same protection as an ERISA anti-alienation clause giving these pensions the same protection as a spendthrift trust. Code can be found at http: From Wikipedia, the free encyclopedia. Legislative history Introduced in the House as H.

United States Department of Labor. Diversion of union welfare-pension funds of Allied Trades Council and Teamsters ; report, together with individual views. Searching Questions and Puzzling Answers". Curb Union Pension Funds". The American Presidency Project. University of California - Santa Barbara. Archived from the original on The Wall Street Journal. Moran , U. Doe , F. Employee Retirement Income Security Act of Retrieved from " https: All articles with unsourced statements Articles with unsourced statements from December Views Read Edit View history.

In other projects Wikisource. This page was last edited on 21 September , at By using this site, you agree to the Terms of Use and Privacy Policy. Introduced in the House as H. Tilley , U. McClendon , U.