ERISA covers most private sector, voluntarily established employee benefit plans, which ERISA divides into “pension plans” and “welfare plans”. Pension plans provide retirement income or are intended to defer income until termination of employment. Welfare plans provide health benefits, disability benefits, death benefits, prepaid legal services, vacation benefits, day care centers, scholarship funds, apprenticeship and training benefits, or other similar benefits.
ERISA sets uniform minimum standards to ensure that employee benefit plans are established and maintained in a fair and financially sound manner. In addition, employers have an obligation to provide promised benefits and satisfy ERISA’s requirements for managing and administering private pension and welfare plans. ERISA is enforced by the DOL’s Pension and Welfare Benefits Administration (PWBA) and the Internal Revenue Service (IRS). The IRS administers Title II of ERISA (except the prohibited transaction provisions), and the vesting, participation, nondiscrimination and funding standards of Title I of ERISA. The DOL administers the remaining portions of Title I and II.
ERISA requires that persons and entities who manage and control plan funds to:
- Manage plans for the exclusive benefit of participants and beneficiaries;
- Carry out their duties in a prudent manner and refrain from conflict-of-interest transactions expressly prohibited by law;
- Comply with limitations on certain plans’ investments in employer securities and properties;
- Fund benefits in accordance with the law and plan rules;
- Report and disclose information on the operations and financial condition of plans to the government and participants;
- Provide documents required in the conduct of investigations to ensure compliance with the law.
ERISA also imposes obligations on plan administrators to provide participants with documents, such as a summary plan description (SPD). The SPD must describe, in understandable terms, participants’ rights, benefits and responsibilities under the plan. In general, administrators must also file annual reports (e.g., Form 5500 Series), which contain financial and other information concerning the operation of the plan.
Likewise, ERISA imposes fiduciary obligations on persons who exercise discretionary authority or control over management of a plan or disposition of its assets. Fiduciaries are required to discharge their duties solely in the interest of plan participants and beneficiaries and for the exclusive purpose of providing benefits and defraying reasonable expenses of administering the plan.
Filing Requirements and Limitations Period
Generally, unless futile, a plan participant must first attempt to exhaust the plan’s internal procedures remedies before seeking judicial relief under ERISA’s civil enforcement provisions (section 502 of the Act, codified at 29 U.S.C. § 1132) to recover benefits due under the plan.
ERISA’s civil enforcement provisions do not contain a statutes of limitations and federal courts often adopt the most analogous state statute of limitations.
Virtually all employee benefit plans are covered by ERISA. In general, ERISA does not cover plans established or maintained by governmental entities or churches for their employees, or plans which are maintained solely to comply with applicable workers compensation, unemployment or disability laws. ERISA also does not cover plans maintained outside the United States primarily for the benefit of nonresident aliens or unfunded excess benefit plans
Remedies and Damages
Under ERISA’s enforcement provisions, a plan participant or beneficiary, may bring a civil action in court to:
- Recover benefits due and enforce rights under the plan.
- Get access to plan documents that have been requested in writing. If your plan administrator does supply the plan documents within 30 days of the written request, a court could find the plan administrator personally liable for up to $100 per day (unless the failure results from circumstances reasonably beyond his or her control).
- Clarify rights to future benefits.
- Get appropriate relief from a breach of fiduciary duty.
- Enjoin any act or practice that violates the terms of the plan or any provision of Title I of ERISA, such as the reporting and disclosure, participation, vesting or funding, and fiduciary provisions, or to obtain other equitable relief.
- Enforce the right to receive a statement of vested benefits upon termination of employment.
- Obtain review of a final action of the Secretary of Labor, to restrain the Secretary from taking action contrary to ERISA, or to compel the Secretary to take action. Obtain review of any action of the PBGC or its agents that adversely affects you.
- Reasonable attorneys fees may be awarded to the prevailing party.
The PWBA also has authority under ERISA Section 502 to assess civil penalties for reporting violations and prohibited transactions involving a plan. A penalty of up to $1,000 per day may be assessed against plan administrators who fail or refuse to comply with annual reporting requirements. Section 502(I) gives the agency authority to assess civil penalties against parties in interest who engage in prohibited transactions with welfare and nonqualified pension plans. The penalty can range from five percent to 100 percent of the amount involved in a transaction. A parallel provision of the Internal Revenue Code directly imposes an excise tax against disqualified persons, including employee benefit plan sponsors and service providers, who engage in prohibited transactions with tax-qualified pension and profit sharing plans. Finally, the DOL is required under Section 502(l) to assess mandatory civil penalties equal to 20 percent of any amount recovered with respect to fiduciary breaches resulting from either a settlement agreement with the Department or a court order as the result of a lawsuit by the Department.