What is ERISA and how does it help Dallas-Fort Worth area employees?
ERISA, the Employee Retirement Income Security Act of 1974, is a federal regulatory regime that governs private employer retirement, health care benefits and certain other employee benefit plans. It is a massive web of legislation, Department of Labor regulations and IRS regulations. ERISA also borrows from and incorporates securities regulations on investments (such as in 401k plans). ERISA grew out of the bankruptcy of automobile manufacturer Studebaker in 1963. The bankrupted manufacturer could not afford to pay promised pension benefits. Many of its employees lost their jobs with little or no pension. ERISA rejected the idea that employees promised a pension worked on a whimsical promise of future pay. Instead, ERISA looks at benefits as part of an employee’s compensation earned today.
ERISA does not require Dallas and Fort Worth employers to offer benefit plans
ERISA does not mandate employers offer benefits (except health insurance obligations under Obamacare). It does not regulate all benefit plans. It does, however, cover the benefit plans within which most employees in America participate. For all its complexity ERISA has two important goals. One, to insulate participant benefits from the financial stability of the plan sponsor (whether a employer-sponsored plan or a union-sponsored plan). Two, to ensure fair and reasonable plan administration.
Participants are insulated from the financial stability of the plan sponsor in many ways. For example, in retirement plans this generally means any accrued benefit that has become vested must be fully funded by the sponsor. Plans generally must be held in trust so that the sponsor cannot take the money back for its own use nor can it be touched by its creditors.
Granted, the financial stability of the sponsor will always have some effect on plan benefits. If the sponsor goes bankrupt, no additional benefits are likely to accrue in the plan. A sponsor can reduce the rate of future accruals, company match, increase health plan premiums and even stop a plan altogether if it can no longer afford to support the plan in its current capacity. However; ERISA sets out rules for how and when any of these events can occur.
If employers offer benefit plans then ERISA establishes a set of rules to protect employees
ERISA also lays out a very complex web of rules that require sponsors to administer the plans fairly and for the benefit of the participants. Plans must specify what classes of employees have access to what plans or what subsets of benefits under what plans. All employees meeting the requirements must have the opportunity to participate. Your boss cannot exclude you from an ERISA plan because he hates you, you wrecked his car, you smell bad, etc. Plans also may give greater benefit to the management or top earners. Administrators cannot make arbitrary decisions about plan management. There are many deadlines, forms, documents and other requirements plans must comply with to make sure it treats participants fairly.
Because ERISA is so complex, it is always possible for a sponsor to either intentionally or negligently fail to meet its duty to participants. Sometimes there is merely disagreement over what ERISA or a plan requires of the sponsor. The resulting effect can be a partial or total loss of benefits. Time may or may not be a critical factor in challenging an ERISA violation. The best way to protect yourself if you feel you are being denied benefits due under an ERISA plan is to seek the counsel of an employment attorney with experience dealing with ERISA. Contact my office to discuss your situation.
Adam Kielich is an employment attorney, divorce lawyer and principal attorney at The Kielich Law Firm in Bedford, Texas. The Kielich Law Firm represents clients in employment law and family law matters across the Dallas and Fort Worth area. Attorney Adam Kielich helps clients with employment discrimination, wrongful termination, overtime pay, FMLA, contested and uncontested divorce, modifications, QDROs and more.