What Is ERISA?
ERISA is an acronym for the Employee Retirement Income Security Act of 1974. It is federal legislation that originally became law in 1974. The main goal of ERISA is to provide protection for individuals who receive employer-sponsored insurance and retirement employee benefits.
One specific goal is to help ensure that employees of private employers will have the insurance benefits when they need them and the retirement income they expect when they retire. Such benefits typically include disability insurance, life insurance, health insurance, accidental death insurance, and pension benefits. To that end, ERISA sets forth numerous fiduciary duties owed by ERISA plan fiduciaries.
What Are Fiduciary Duties and Who Is Responsible for Them?
The fiduciary responsibilities under ERISA include managing plans with the interests of beneficiaries and participants first and foremost. Trustees, plan administrators, insurance companies and other fiduciaries involved in making claim decisions or managing assets under an ERISA plan cannot make decisions that place the interests of the employer or themselves before the plan participants or their beneficiaries. Some examples of specific requirements include:
- Acting prudently. Fiduciaries would breach their fiduciary duties by managing investments or asset pools recklessly and/or unreasonably.
- Diversifying. It is typically considered in the best interest of participants and beneficiaries if the value of the assets is stable, and stable investments tend to be diversified in nature.
- Following plan documents. Employers and other plan fiduciaries must in most cases follow the documents that detail how the plan works and what benefits should be paid out. They cannot change their mind about benefits later and simply pay at a different rate that is not defined by the plan. There are exceptions to this rule that include making sure that they act consistently with their representations made to plan participants even if later they determine the representations were false.
- Avoiding conflicts of interest. Fiduciaries cannot engage in activities concerning the plan in an attempt to benefit the employer or other fiduciaries or partners.
- Acting on the direction of plan participants. In cases where plan participants have a say in how their own retirement assets are invested, they have the final word on the matter. If they instruct a fiduciary to invest their assets in a certain manner, the fiduciary must typically follow through on that request.
- Do not misrepresent the plan terms. Plan fiduciaries must communicate honestly and accurately about the plan and the plan benefits.
Anyone who is involved in managing the funds or who makes claims decisions with respect to the plan benefits related to employer-sponsored benefits plans will act in a fiduciary role. Under ERISA, individuals are fiduciaries if any of the following are true:
- They have a certain level of control in managing the assets of the plan
- They can buy or sell assets on behalf of the plan at their own discretion
- They provide any type of investment advice related to the assets within the plan
- They decide claims by exercising discretion in making claims decisions
Signs That Fiduciary Duties Under ERISA May Have Been Breached
Sometimes there are signs of a fiduciary breach, such as someone refusing to follow through on your requests or your benefits payments not being paid. However, that is not always the case, so it is important to review your retirement account statements regularly and look for any potential irregularities and it is important to critically review claim denials for benefits payable under a plan.
Some examples of signs that fiduciary duty might have been breached include:
- Inconsistencies with pension or other retirement account reporting, or statements arriving late or not at all.
- Contributions being withheld from your paycheck are not transferred to your retirement accounts promptly.
- Your statements reflect investments that you did not authorize.
- You notice new, excessive, or confusing fees and other withdrawals.
- You receive a denial of a claim for benefits you have made under an insurance policy covered by your plan.
- You receive a denial of a claim for benefits you have made under your pension or retirement plan.
- You are told that the amount of benefits you are to receive from your pension plan is inconsistent with representations that plan fiduciaries have previously made to you.
Understanding Your Options if Fiduciary Duties Are Breached
The term fiduciary means to involve a high level of trust. Often, fiduciary relationships exist when there are financial matters at stake and there are parties that manage the finances on behalf of and for the benefit of others. For example, if you create a conservatorship and have a trustee manage it on behalf of a disabled individual, the trustee has a fiduciary duty to manage the assets for the benefit of that person.
ERISA creates a fiduciary relationship between pensioned employees and others with employer-sponsored benefits and the entities that operate those plans and make discretionary decisions regarding those plans. If the insurance companies or plan administrators involved act in bad faith or otherwise breach their fiduciary duties, employees and plan participants may have options for seeking compensation for any related losses. Working with an experienced ERISA lawyer can help you understand your rights and what options you have for enforcing them.
Steps to Take if You Believe Fiduciary Duties Have Been Breached
If you believe that you are the victim of a fiduciary breach of duty related to an ERISA-covered plan, there may be remedies available to you. You can pursue an ERISA appeal and/or file an ERISA lawsuit that may help you recover any losses related to the breach. Fiduciaries who breach their duties can be required to make good on any losses contemplated by the ERISA plan.
Start by reaching out to an experienced ERISA legal team. Provide them with as many details as possible so they can evaluate your case and help you understand if you have cause for a lawsuit. You may want to begin collecting documentation and information as soon as you believe a breach of duty is possible. Some information you might want to gather includes copies of investment and benefits statements related to your plan, claim denial letters, your claim forms and appeal letters, your plan documents, your claim file/administrative record, all communications between you and the insurer/ERISA fiduciary and any notes you can make about the signs you have noticed.
For help fighting for your ERISA benefits, call McKennon Law Group PC. Call us at 949-504-5381 to find out more about how we can help with your ERISA claims, including your breach of fiduciary duty claim.