Employers’ Guide to Understanding ERISA

The Employee Retirement Income Security Act (ERISA) provides insurance companies and private employers with guidelines on how to administer retirement and health plans to employees.

ERISA was enacted in 1974 and applies to plan years starting on or after Jan. 1, 1975.

Previously, the U.S. Department of Labor regulated employee benefit plans under the Welfare and Pension Plans Disclosure Act, but that act’s scope was limited, and the public had concerns over the mismanagement and abuse of private pension plans. ERISA broadened the scope of information available to plan participants; required employers to manage health care funds in plan participants’ best interests; expanded on the reporting procedures to the government; and sets minimum standards for employers who provide pension plans.

ERISA does not cover retirement plans by governmental entities or plans established by churches for their employees. It also doesn’t cover plans that relate to state benefit laws, such as unemployment or workers’ compensation. Although the ERISA definition does not require private employers to have pension plans, it provides minimum standards for those that do.

Since its inception several amendments have been made to ERISA to expand the protections available to health benefit plan participants and beneficiaries, including protections for mental health issues, longer periods of coverage and reconstructive surgery for cancer patients.

For instance:

• The Consolidated Omnibus Budget Recon- ciliation Act (COBRA) provides employees

and their families the right to continue their health coverage after the loss of a job.

• The Health Insurance Portability and Accountability Act (HIPPA) limits pre-existing medical conditions and gives employees credit for the time they held previous coverage.
• The Newborns’ and Mothers’ Health Protection Act requires plans that offer maternity coverage to pay for the mother’s hospital stay after childbirth.
• Other protections were granted through the Mental Health Parity Act, the Women’s Health and Cancer Rights Act, the Affordable Care Act and the Mental Health Parity and Addiction Equity Act.

The key provisions in ERISA require employers to:

Provide Information

Employers must provide information to employees with pension plans on how to file a claim for benefits and give them notice when significant plan changes are made. In addition, employers also must make participants aware of what they need to do to be vested in the plan.

Assume Fiduciary Responsibilities

A plan administrator is a fiduciary – someone who has discretionary authority and control over the management and assets of the plan Fiduciaries must work solely for the benefit and in the best interests of plan participants. For instance, they must seek to minimize risk when investing an employee’s retirement funds. If any improper planning results in a large loss for the employee, a fiduciary must restore that loss.

Establish Processes

Employers must establish a grievance and appeals process to help participants who are having problems accessing benefits from their plans.

Enable the Right to Sue

Plan participants can sue if they believe their company has unfairly denied them access to their benefits or if there has been a breach of fiduciary duty.

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