Employee Retirement Income Security Act (ERISA)

The Employee Retirement Income Security Act (ERISA) of 1974 was passed to establish minimum standards and protections for employees participating in group health and pension plans in the private industry sector. Companies are required to provide plan information to all participants to include benefits and costs. ERISA also requires administrators to setup an appeals process should an employee have an issue with the coverage or costs of the plan. It also provides employees guidelines for filing a grievance or lawsuit should they feel that a plan is discriminatory or improperly managed.

ERISA provides protection within group health and pension plans. It doesn’t regulate Workers’ Compensation, Insurance or Unemployment laws. Furthermore, ERISA doesn’t offer protection to government or persons employed by church entities.

ERISA ensures that private sector employers manage funds exclusively for the plan and its participants and requires specific reporting procedures to the government to ensure compliance. It protects against mismanagement of plan funds by requiring that the fiduciary of the plan act in the best interest of the plan and its participants. If a retirement plan experiences a large loss as a result of poor fiduciary planning or administration, the company may be liable for such losses and required to fund those losses back to its participants.

Fiduciaries of company health and retirement plans are also required to actively report significant changes to a plan. If a participant requests plan documents or summaries, ERISA requires that employers provide the documents or plan information (such as vesting and how to file a claim) upon request and in writing.

ERISA has been amended numerous times. One of the most well-known amendments to ERISA is the Health Insurance Portability and Accountability Act (HIPPA), which protects individuals and families from discrimination due to health reasons and/or pre-existing conditions. Another significant amendment to ERISA is the Consolidated Omnibus Budget Reconciliation Act (COBRA) which provides employees with the ability to extend their group health insurance coverage should their employment status change or their dependent’s eligibility change.