The Employee Retirement Income Security Act of 1974 (“ERISA”) is the federal law regulating employee benefits provided by private sector employers. ERISA does not require that employers offer their employees retirement, health care, or any other type of benefit. However, the law regulates the management of such benefit plans, investment of plan assets, disclosure of information, the claims process, and many other technical aspects. ERISA is enforced by the United States Department of Labor’s Employee Benefits Security Administration (EBSA), as well as through private lawsuits brought by plan participants and beneficiaries against employers, plans and plan fiduciaries.
Right to Inspect Plan Documents
Under ERISA, disclosure is the name of the game. You have a right to review certain documents governing an employee benefit plan in which you participate - be it a pension, 401(k), health or disability plan. You have a right to receive the plan document, summary plan description, annual report (Form 5500), summary annual report and other types of disclosures. If you make a request for documents to the “plan administrator” (who is often your employer), the documents must be provided to you within 30 days. If the documents are not provided within 30 days, you may seek against the plan administrator penalties of up to $110 per day of non-compliance, plus attorney fees and costs.
A defined-benefit pension plan is a retirement plan that pays out a guaranteed benefit (usually monthly) based on the time of an employee’s service with their employer. Many pensions also allow provide for a monthly benefit in the event of a participant’s disability. Some pension plans are sponsored jointly by an employer and a labor union and other plans are sponsored by the employer alone. Some pension plans are sponsored by government employers, but these plans are generally subject to different state or federal laws, not ERISA. Pension disputes may occur concerning the monthly benefit formula or service credit, or whether or not one is considered “disabled” or “retired” within the meaning of the plan documents. Sometimes pension claims are denied by the plan administrator, requiring an internal appeal and (at times) litigation.
A 401(k) is probably the most common type of defined contribution retirement plan. This plan grows (or declines) in value based on contributions made, investment earnings and plan expenses. A 401(k) usually allows participants to direct which investments their plan accounts are invested in. In recent years, claims for breach of fiduciary duty have been brought against plan sponsors for offering overly expensive investments with high fees that reduce the participants’ account value. Other types of breach of fiduciary duty claims may be brought for mismanagement of plan assets.
Money Purchase Plans
These defined contribution plans are retirement plans used primarily by employers whose employees work on prevailing wage covered projects, such as in construction. A money purchase plan often requires an employer to contribute the prevailing wage benefit component to the plan for each hour of covered work. Often times, employers fail to pay the proper prevailing wage or benefits to their employees. This practice may constitute an ERISA violation.
Disability Benefits/LTD Plans
Many employers offer long-term or short-term disability plans to their employees. When an employee is unable to perform the duties of their job, they may file a disability claim under the plan and obtain a portion of their prior pay. These plans are often administered by insurance companies. Insurers will frequently deny disability claims, arguing that the employee is not actually disabled, thereby requiring an internal appeal and ultimately litigation.
Life Insurance/Death Benefits
Many employers offer life insurance and death benefit plans to their employees. If an employee dies and their beneficiary makes a claim under the plan, a plan administrator may deny the claim, necessitating an internal appeal and possibly litigation.
Employee Stock Ownership Plans (ESOPs)
An ESOP is a retirement plan that is generally invested in stock of the employer and plan accounts are held by the employees. Many employers are not publicly traded and thus their stock value must be valued by an independent appraiser. Often times, there are problems with stock valuation such that the ESOP pay too much or too little for the stock at the time the ESOP purchases or sells stock. In one such case, EBSA was able to recover over $7 Million based on a faulty stock valuation.