Who Does ERISA Apply To?

What happens if an employer denies benefits to an employee? Or, what if an employee feels their benefits plan is not being managed properly? Often the first line of defense for employees is the Employee Retirement Income Security Act (ERISA), a 1974 law meant to protect plan participants with benefits.

ERISA sets minimum standards for most voluntarily established employee pension, retirement plan and health plans to provide protection for individuals in these plans. ERISA applies to private-sector companies that offer pension benefits and retirement benefits to employees, regardless of the employer entity—whether it’s a sole proprietorship, partnership, corporation, nonprofit, or LLC. Also, there is no minimum number of employees required for the employer. If it’s a private business, it’s covered. ERISA requirements and employee benefit plans do not apply to government entities, churches, and plans maintained for purposes of complying with laws for workers’ compensation, long-term disability, or unemployment.

There have been some significant amendments to ERISA, familiar to many working Americans:

• Consolidated Omnibus Budget Reconciliation Act (COBRA), which provides some workers and their families with the right to continue their health insurance coverage for a limited time after certain events, such as a job loss
• Health Insurance Portability and Accountability Act (HIPAA), which provides protections for working Americans and their families who have preexisting medical conditions or might face discrimination in health coverage based on factors related to an individual’s health
• Newborns’ and Mothers’ Health Protection Act
• Mental Health Parity Act
• Women’s Health and Cancer Rights Act

What Employee Benefits Are Covered?

ERISA plans apply to many different employee benefits, including:

• Health insurance plans
• Defined benefit or contribution plans
• Health flexible spending accounts
• Pre-paid legal services plans

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What Are the Requirements for Plans?

ERISA requires plans to provide its participants with plan information, which includes important information about plan features and funding. One of the most important documents participants are entitled to receive is the summary plan description (SPD). Employer plans are required to provide the SPD automatically to employees once the employee becomes a participant of the plan. The SPD tells participants what the plan provides and how it operates, including:

• information on when an employee can begin to participate in the plan
• how service and benefits are calculated
• when benefits become vested
• when and in what form benefits are paid
• how to file a claim for benefits

If a plan is changed, participants must be informed free of charge. In addition to the SPD, the plan administrator must provide to participants a copy of the plan’s summary annual report. This report is filed with the Department of Labor.

ERISA also requires that plans establish a grievance and appeals process for participants to get benefits from their plans, and give participants the right to sue for benefits and breaches of fiduciary duty.

Plan Administrators Are Held to a Fiduciary Standard of Care

ERISA provides fiduciary responsibilities for those who manage and control plan assets. The primary responsibility of fiduciaries is to run the plan solely in the interest of participants and beneficiaries and for the exclusive purpose of providing benefits and paying plan expenses. Those fiduciary responsibilities also include:

• To act prudently and diversify the plan’s investments to minimize the risk of large losses
• Follow the terms of plan documents to the extent that the plan terms are consistent with ERISA
• Avoid conflicts of interest and not engage in transactions on behalf of the plan that benefit parties related to the plan, such as other fiduciaries, services providers, or the plan sponsor

Fiduciaries who do not follow these principles of conduct may be personally liable to restore any losses to the plan, or to restore any profits made through improper use of plan assets. Courts may take whatever action is appropriate against fiduciaries who breach their duties under ERISA including their removal.

Find Legal Advice

If employees have concerns about their employer ERISA-covered plan, they should seek out advice from an attorney experienced in employee benefit disputes to determine a course of action.