The Employee Retirement Income Security Act of 1974 (ERISA) is federal legislation that establishes minimum criteria for the majority of voluntarily organized health and pension plans in private industry. It provides protection for individuals who elect them. ERISA preserves the assets of millions of people so that the funds deposited into retirement plans during their working careers will be available upon retirement. However, ERISA does not cover retirement plans maintained or established by churches with employees, governmental entities, or plans that are maintained only to comply with applicable unemployment, disability laws, or workers’ compensation. ERISA also does not include plans managed outside of the United States principally for the interest of unfunded excess benefits plans or nonresident aliens.
A division of the Department of Labor (DOL), the Employee Benefits Security Administration (EBSA), is the governing body responsible for administering and enforcing ERISA. ERISA also created Individual Retirement Arrangements (IRA’s), produced simpler methods for self-employed people to establish retirement plans, and introduced employee stock ownership to the IRS tax code.
ERISA refers to the comprehensive collection of laws governing employee benefits plans, which are found principally in ERISA itself and the Internal Revenue Code. It does not mandate that employers provide a benefits plan, but it does regulate the maintenance of the health benefits plans. While offering health and retirement plans is optional, once they are provided they must be managed in agreement with the various provisions that ERISA mandates:
- Conduct: ERISA rules govern the conduct of managed care, such as HMOs, and the fiduciaries who are financially responsible for the administration of the plan.
- Financial and best-interest protection: ERISA serves as a defense to ensure that funds in a plan are preserved and distributed in the best interest of members of the plan. It also bars discriminatory practices when awarding plan benefits to qualified persons.
- Accountability and reporting: ERISA requires accurate and detailed accountability and reporting to the federal government. Employers who neglect to follow ERISA requirements face limited penalties.
- Procedural safeguards: ERISA requires the establishment of a written policy to determine the claims filing process, which also must specify a written appeals process for denied claims. It also requires that claims appeals be handled in a timely and fair manner. To seek specific relief, plan participants must file ERISA legal claims in Federal Court after depleting all of their regulatory options. Lawyers with expertise in the practice of ERISA law can help these people with their claims and establish their rights.
- Disclosures: Specific disclosures must be furnished to plan participants, including a written plan summary, explicitly listing the offered benefits, the rules for receiving and limitations of those benefits, and other guidelines for obtaining the benefits, such as advance referrals for doctor visits or surgery.
ERISA has been revised to include two new areas that explicitly discuss health insurance coverage: The Health Insurance Portability and Accountability Act of 1996 (HIPAA) and Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA).
Private Industry Minimum Standards
The majority of ERISA’s provisions are valid for plans beginning on or after January 1, 1975. It defines when an employee must be permitted to become a participant and the length of time they have to work before earning a non-forfeitable interest in their retirement account. It also specifies how long a member can take a leave from their job without it affecting their benefit, and whether a spouse has a right to part of their pension in the event of the participant’s death.
Under ERISA, plans must provide members with notices that provide significant information about plan funding and features. The plan must provide some detailed information on a regular and automatic basis. ERISA also guarantees payment of secure benefits upon termination of a defined plan through a federally chartered organization, the Pension Benefit Guaranty Corporation.
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