Understanding ERISA as an Employee

If you have health insurance, life insurance, disability insurance, accidental death and dismemberment insurance or retirement benefits through your employer, your plans may be covered by the Employee Retirement Income Security Act of 1974, or ERISA, a federal law governing how insurance claims and benefits must be handled.

What Is ERISA?

ERISA stands for Employee Retirement Income Security Act. This is a federal law that was passed in 1974 and has been updated multiple times to add protections and ensure compliance with other federal laws. ERISA sets minimum standards that the administrators of certain employee benefits plans must meet.

ERISA is a landmark federal statute that sets the minimum standards for retirement, health, and other welfare benefit plans offered by private-sector employers. Designed to protect plan participants and beneficiaries, ERISA imposes strict fiduciary responsibilities on those who manage and control these plans, ensuring that the interests of employees are prioritized over those of the plan sponsors. By establishing clear guidelines for plan participation, vesting, benefit accrual, and funding, ERISA has fundamentally reshaped the landscape of employee benefits, providing a consistent framework that safeguards the financial security of millions of workers.

Beyond its regulatory structure, ERISA emphasizes transparency and accountability in the administration of employee benefit plans. Plan administrators are required to provide detailed disclosures about plan features, funding levels, and participants’ rights, enabling individuals to make informed decisions about their benefits. Moreover, ERISA empowers participants with the right to seek legal recourse if fiduciaries breach their duties or if the plan fails to operate in accordance with established standards. This robust system of protections not only enhances trust in employer-sponsored benefit plans but also reinforces the commitment to fair and equitable treatment of employees across the United States.

ERISA applies to a wide range of benefits. Some types of benefits that ERISA may cover include:

• Retirement plans such as 401(k) plans, pension plans, profit-sharing plans, and Employee Stock Ownership plans;
• Health insurance plans, including medical insurance, dental insurance, and prescription drug plans;
• Disability insurance, including short-term and long-term disability coverage plans;
• Life insurance; and
• Accidental death and dismemberment plans.

What Is Covered By ERISA?

ERISA applies to employer-sponsored benefits offered by private-sector employers. It does not apply to benefits provided by government employers at the federal, state, or local levels. There are other exceptions as well, such as church-affiliated employers and self-funded policies.

ERISA governs a broad range of employee benefit plans offered by private employers, including retirement plans such as defined benefit pension plans, defined contribution plans (like 401(k)s), profit-sharing plans, and employee stock ownership plans. It also covers welfare benefit plans, which encompass health insurance, disability insurance, life insurance, and other related benefits such as severance pay and tuition assistance programs. While ERISA sets minimum standards and fiduciary responsibilities for these plans, it is important to note that it does not require employers to offer any benefits; rather, it ensures that if benefits are provided, they are managed and administered fairly and transparently.

If you believe an insurance company has improperly denied your claim and you want to know whether your benefit is covered by ERISA, you should consult with an experienced ERISA attorney.

How Does ERISA Protect You and Your Employee Benefits?

ERISA protects individuals participating in employer-sponsored benefits plans, helping to ensure that they receive the benefits they are promised fairly and transparently. ERISA provides several requirements that administrators must follow in maintaining coverage and the processing and reviewing of claims. It has time requirements for plan administrators for reviewing claims. It allows for access to seek recovery in federal court when an administrator fails to meet the requirements or otherwise acts improperly in the administration of a claim or the plan.

ERISA protects employees by establishing stringent fiduciary duties that require those managing employee benefit plans to act in the best interests of plan participants. This means that plan administrators must follow strict guidelines and procedures when investing plan assets, handling claims, and managing the overall plan. Additionally, ERISA mandates that employees receive detailed disclosures about their benefits, including information about plan features, funding levels, and the rights they have under the plan. These requirements not only ensure transparency but also help employees make informed decisions about their retirement and health benefits.

Furthermore, ERISA provides employees with the right to seek legal recourse if their benefits are mismanaged or if fiduciaries fail to uphold their responsibilities. This legal framework empowers individuals to hold employers and plan administrators accountable for any breaches of duty, thereby safeguarding the financial security and well-being of employees. By creating clear standards for benefit administration and offering a mechanism for enforcement, ERISA plays a crucial role in protecting workers’ interests and ensuring that the promised benefits are delivered in a fair and equitable manner.

ERISA Requires Certain Disclosures

ERISA requires that plans operate transparently, ensuring participants fully understand their benefits and have some insight into how plans are run. This transparency is accomplished through required disclosures of information such as Summary Plan Descriptions, Summaries of Benefits and Coverage, or regular statements of retirement account balances.

ERISA Protects Your Retirement Benefits

ERISA outlines some provisions regarding when employees become fully vested in retirement plans. It also protects your benefits once you earn them. Under ERISA, employers must keep retirement and pension funds separate from operating funds. Doing so helps ensure that employees have access to their benefits even if the employer experiences financial trouble or the employee leaves the company.

ERISA Ensures Your Right to Appeal

If your claim for benefits under an ERISA-covered plan is denied, you can appeal the decision. This is true for any type of claim covered by ERISA, including health insurance, life insurance, disability, and retirement benefits claims. These appeals must adhere to strict time deadlines, which vary depending on the type of claim. Consult with an experienced ERISA attorney as to the deadlines in your particular situation.

ERISAProtects You From Retaliation

Employers cannot act negatively against you because you asserted your rights under ERISA. They cannot fire, discipline, demote, or otherwise harass you for filing a claim or appeal, testifying in an ERISA investigation, requesting plan documents, or taking other actions supported by ERISA protections.

ERISA Lets You Continue Your Health Coverage If You Leave Your Job

One of the many updates to ERISA over the years was the Consolidated Omnibus Budget Reconciliation Act (COBRA). This ERISA amendment ensures that employees covered by an employer-sponsored health insurance plan could maintain that coverage for up to 18 to 36 months after leaving a job.

You have the right to COBRA benefits if you leave a job voluntarily, are laid off, or are fired—outside of situations that involve gross misconduct. You can also leverage COBRA benefits if you reduce your working hours and are no longer classified as full-time to maintain benefits. Your covered spouse might also be able to use COBRA benefits if you pass away or get divorced and are no longer eligible for regular benefits through your employer.

Asserting Your ERISA Rights

ERISA allows you to seek recovery by filing a lawsuit against the plan administrator, and sometimes the employer, when your claim has been improperly denied or you have been damaged by mismanagement of the plan. However, ERISA requires you to exhaust all administrative remedies prior to filing a lawsuit, which means completing whatever administrative appeals process is described in the ERISA plan documents.

If you believe that your ERISA rights are being infringed upon or that your plan administrator or insurance company is acting in bad faith, consult with an experienced ERISA attorney about your matter. Call the expert ERISA attorneys at McKennon Law Group PC at 949-504-5381.