5 Things You Need to Know about ERISA

The Employee Retirement Income Security Act (ERISA) was enacted to protect employees. It was signed into law in 1974 and was sold as a solution to corporate pension plans that were not looking out for the best interests of their employees. There are 5 things that you need to know about ERISA, and you'll need to decide who ERISA really protects.

1. Covers Only Private Employees

You might think that you're covered under ERISA when you're not. Only employees in the private sector are covered by ERISA plans. A non-private employer may offer you a plan, but it won't be an ERISA plan because of federal laws.

2. Bonded Fiduciary

The person(s) or company responsible for managing the ERISA plan is known as the fiduciary. They will be held responsible for mismanagement of the plan, and they are required to be bonded by law. The purpose of the bond requirement is to protect employees from financial loss. Some fiduciaries are exempt from the bond requirement, so you should find out whether the fiduciary has bond coverage.

3. Right to Sue Fiduciary

ERISA allows employees to sue fiduciaries for breach of their duties or for denying benefits. That's why the bond issue is important, to ensure that employees can get financial recovery if they bring an action to court and win the case. Taking an insurance company to court may be necessary if you're injured and have a mountain of medical bills that your ERISA plan refuses to pay.

4. State Laws

ERISA trumps state insurance laws in many cases. However, there are some instances in which your employer doesn't have to incorporate ERISA provisions and is exempt under state laws. For example, ERISA may require coverage for mental health benefits, but your employer doesn't have to provide health insurance for that under its ERISA plan if state laws don't require it. Another common exemption that some employers take is not following ERISA's requirement to provide health coverage to an infant from the time he or she is born. You should know the details of the ERISA plan offered at your job and not assume coverage based on what you know or have read about federal requirements.

5. Denial of Claims

Insurance companies cannot wrongfully deny your claims under ERISA, no matter what the state laws are. It's one of the protections offered to employees to ensure that they will receive the benefits they are expecting. The company has to do a number of things, such as the following, before they can lawfully deny coverage:

  • give reasons for the denial, and include sections of federal and state laws that apply;
  • provide information to you so that you can submit a new claim that will get approved; and
  • explain your right to appeal or file a lawsuit.

Non-ERISA plans are not as stringent in their rules for denial.

Whether ERISA protects employees, insurance companies, private employers or all of the above is an ongoing debate. What's important is that you know what to expect from a plan if your employer offers one.

blog comments powered by Disqus