Definitions and examples of ERISA in the workplace
ERISA, or the Employee Retirement Income Security Act of 1974, is a U.S. federal law that establishes minimum legal standards for employer-sponsored retirement, health and benefit plans such as life insurance, disability insurance and apprenticeship plans. While this law exists to protect employees and applies to many private employers, some employers are exempt. Additionally, ERISA does not mean that employers are required to offer benefit plans, but it sets the legal standards for those that do.
The main goal of ERISA is to provide access to affordable retirement savings options to approximately 38 million, or 23%, of all full-time, private-sector employees who do not currently have such access. ERISA-covered retirement plans provide for higher contribution limits and stronger protections from creditors than traditional IRAs.
ERISA also provides similar standards related to affordable healthcare coverage by introducing a type of plan that enables multiple employers to join together under one association health plan to provide access to said healthcare coverage to their collective employees. ERISA was expanded in 2018 to provide increased availability of retirement savings options to part-time workers and self-employed individuals.
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Quick tips about ERISA
To better understand ERISA, here are some tips regarding the statute:
- ERISA has been in place since 1974 when President Gerald Ford signed the act into law. Since then, there have been several amendments to adjust for the changing economy as recently as 2019, when the House of Representatives passed the SECURE Act, an amendment to ERISA regarding MEPs (multiple-employer plans). These amendments provide certain rights and responsibilities to every plan provider, participant and beneficiary.
- ERISA protects retirement savings from mismanagement, requiring accountability and transparency on the part of plan administrators and those who manage the actual funds. The statues also provide similar protections for employer-sponsored health benefits.
- ERISA does not cover certain benefit plans. For example, government employees’ plans are not covered, nor are those for most churches.
- ERISA supersedes state laws for insurance plans in most cases of self-insured benefit plans because ERISA is a federally-enforced statue.
- As an employer/provider, participant or beneficiary, you have the right to request a copy of the most recently updated summary and description of your plans, as well as the latest annual reports, contracts and any other documents related to a plan you’re providing, participating in or benefiting from.
Closing thoughts about ERISA
The past 45 years of ERISA protections have protected millions of employees and their money, but there have been some compliance issues along the way. Some of the major complications happened when changes were introduced with the Affordable Care Act, and again when new administration moved forward with even more policy changes. For employers, these changes have presented a complex web of compliance issues while improving the outlook of cost, quality and transparency of care for employees.
Proposed changes include measures to provide even more flexibility and cost-savings to employees while simplifying the process for employers. With bipartisan support behind these proposals, employees and employers may anticipate beneficial consequences for all, including cost savings, healthier workforce and less benefit-related employee turnover. Some unprecedented changes, including the ban on discrimination based on gender identity, religious or moral grounds are still hanging in the balance and are expected to be resolved one way or another.
Individual states are ramping up their efforts to regain control over healthcare policies in terms of reforms, cost controls, consumer protections, coverage mandates and paid leave laws. Employers are left to decide how best to integrate their federal compliance duties with those of their state. Larger employers can expect more stringent rules for ensuring compliance with ACA mandates, including health reporting, prescription coverage and collaboration with vendors to make sure all requirements are met.
Related: How to Create a Performance Improvement Plan
The following questions are commonly asked about ERISA:
Are ERISA claims subject to arbitration?
Overturning 35 years of precedent, the 9th U.S. Circuit Court of Appeals ruled in 2019 that arbitration clauses can be enforced, forcing plan participants to waive their right to participate in class-action lawsuits against dishonest, poorly-performing or inept plan management.
What does ERISA protection apply to?
For employees who receive health care benefits, disability insurance and/or a 401(k) retirement plan through their employers, ERISA provides for legal rights such as:
- The right to sue, file a grievance and/or initiate an appeals process to receive benefits
- The right to sue for mismanagement of plan funds
- The right to retain health insurance for a specified amount of time after discharge from a job
- The right to fight against discrimination in health care coverages and/or practices
How is ERISA enforced?
The U.S. Department of Labor has a special section called the Employee Benefits Security Administration, which works with the IRS and the Pension Benefit Guaranty Corporation to administer and protect the rules set forth by ERISA. Complaints about ERISA-covered benefits can be made via the U.S. Department of Labor in the form of a phone call or written correspondence.