The Employee Retirement Income Security Act of 1974 (ERISA) is the federal law that sets minimum standards for retirement and health benefits plans in private industry. ERISA doesn’t require employers to offer benefits. It only requires those that do to meet certain standards.
Essentially, ERISA governs the administration of employee benefits plans and the rights of the beneficiaries of those plans.
It was enacted in response to perceived abuses of retirement benefits by private-sector employers, with the goal of protecting employees against the loss of promised benefits.
ERISA requires individuals who manage benefits plans to meet certain standards of conduct. Complying can be difficult; it’s a complex law. There are three components to compliance:
- Reporting: Employers must submit certain reports to the IRS each year and comply with U.S. Department of Labor requests.
- Disclosure: Employers must advise employees of certain facts regarding their benefits packages.
- Paying claims: Benefits plans must spell out the procedures for processing and paying of claims.
Fiduciary duty
The concept of fiduciary duty is central to ERISA compliance. Employers must care for employee benefits as they would their own assets.
The 2007-2008 collapse of the subprime mortgage market, followed by the financial crisis on Wall Street, led to a proliferation of breach-of-fiduciary-duty lawsuits.
Even now, hundreds of lawsuits are still working their way through the legal system.
Application of ERISA
Congress clearly intended for ERISA to be the governing law for employee benefits plans and designed the law to set forth uniform standards.
ERISA pre-empts state laws relating to employee benefits plans, with a few exceptions (involving insurance, banking or securities laws).
ERISA covers any “employee benefits plan” established or maintained by an employer engaged in commerce or in any activity affecting commerce.
The term “employee benefits plan” can refer to an employee pension benefit plan—covering retirement benefits—or an employee welfare benefit plan, which involves medical, accident, disability, death, unemploy-
ment, vacation, apprenticeships, training programs, day care, scholarship funds, prepaid legal services and other benefits.
The law broadly defines an employ-ee as “any individual employed by an employer.” The Supreme Court has ruled that “employee” status is determined by the amount of control the employer exerts over a worker to differentiate him from an independent contractor.
DOL's official ERISA guidance
ERISA is administered by the Department of Labor’s Employee Benefits Security Administration (EBSA). For complete compliance information, see www.dol.gov/ebsa/compliance_assistance.html.
EBSA’s web page features links to ERISA guidance on:
- Health insurance, including how ERISA relates to the Affordable Care Act health care reform law, the Consolidated Omnibus Budget Reconciliation Act (COBRA) and the Health Insurance Portability and Accountability Act (HIPAA)
- Retirement and 401(k) plans
- Reporting and filing requirements
- Employers’ fiduciary responsibilities.
