ERISA Compliance: More Than Just Five Letters The Employee Retirement Income Security Act of 1974 (“ERISA”) is a United States federal labor and tax law that sets minimum standards for voluntary established retirement and healthcare plans in the private industry in order to provide protection for those individuals in these plans. ERISA is important in protecting retirement assets by implementing rules that qualified plans need to follow to ensure that fiduciaries of these qualified plans do not misuse plan assets. In addition to retirement accounts, the law also covers some non-retirement accounts, for example, employee health plans. Under ERISA, employees are protected against unfair company practices that could deny them of their benefits or cause the employee’s stock price to lose value. History of ERISA ERISA was enacted with the purpose of addressing irregularities in the administration of large pension plans. These issues uncovered a lack of protection for workers. In 1961, United States President John F. Kennedy created the President’s Committee on Corporate Pension Plans which began the movement for pension reform. However, even with this committee in place, there was still much more to be done to enforce worker protections. Incidents that occurred in the 1960s are a prime example of this need. For example, when the Studebaker-Packard Corporation, a car company, closed its factory in Indiana in 1963, more than 4,000 workers who were aged 40-59 lost some or all of their pension plan benefits because the plan was underfunded.[1] Another occurrence that took place in the 1960s which displays the importance of worker protection was when Teamsters’ Central States Pension Fund raised issues of fiduciary malfeasance related to retirement accounts.[2] These incidents all took place before ERISA was enacted, and such incidents were what encouraged the creation of the law: As the public began to see just how easy an employee’s hard-earned benefits could be lost, it began to recognize that laws were needed to protect these workers and a system needed to be created to enforce regulations and investigate wrongdoings. As a result, ERISA was officially launched into action in 1974 when it became evident that there was a dire need to address public scrutiny regarding private pension plan funds mismanagement and abuse. It was signed into law by President Gerald Ford on September 2 of 1974, Labor Day. Since then, ERISA has continued to achieve its original purpose through its efforts and leadership and continues to be updated and amended as times change. Who’s In Charge? The Employee Benefits Security Administration (EBSA), which is a unit of the Department of Labor (DOL), is responsible for overseeing, administering, regulating, and enforcing provisions of the ERISA. This agency was formerly known as the Pension and Welfare Benefits Administration (PWBA). The EBSA maintains its headquarters in Washington, D.C., our nation’s capital, and is led by the Assistant Secretary of Labor for Employee Benefits: Preston Rutledge. This position requires a presidential nomination and a United States Senate confirmation, making it a title and position of high importance and respect. EBSA maintains 15 regional and district field offices throughout the country. These offices conduct investigations to find and correct ERISA violations and related criminal laws. What’s Covered Most retirement plans that are sponsored by employers are covered by ERISA. Examples of covered plans regarding retirement include the following:

  • 401(k) plans: Unlike pensions, 401(k) plans are defined-contribution plans. Defined-contribution plans are retirement plans in which employees themselves contribute a fixed amount or a percentage amount of their paychecks to an account that is specifically set up to fund their future retirement. A 401(k) plan gives employees a tax break on the money they contribute.
  • Deferred-compensation plans: a deferred-compensation plan withholds a portion of an employee’s payment until a specific date in the future, which is usually retirement. On that date, the sum owed to the employee is paid out.

ERISA also covers a variety of non-retirement employer plans. These plans include, but are not limited to, the following:

  • Health maintenance organization (HMO) plans: a health insurance plan that provides health services through a network of doctors for a fixed fee, paid monthly or annually.
  • Flexible spending accounts (FSAs): an FSA is a specified account that one puts money into that will be used to pay for certain out-of-pocket healthcare costs. No taxes are paid on these savings.
  • Disability insurance: a form of insurance that insures the beneficiary’s earned income against the risk that a disability, such as an injury or illness, creates a barrier for completion of work functions.
  • Life Insurance: life insurance is a contract between policyholder and an insurer (usually an insurance company), where the insurer promises to pay a designated beneficiary of the insured a sum of money in exchange for a premium. This payment is made upon the death of the insured individual.

Employee Rights Under ERISA This Act provides several rights to employees. Among these rights include the right to participate in fair and timely processes for benefit claims, elect to temporarily continue group health coverage after losing their coverage, receive information about their pension or health benefit plans, receive certificates verifying their coverage under a particular plan, and recover their benefits under the plan.[4] ERISA Preemption But first…what’s “preemption?”             There are typically two sets of laws: federal and state. Preemption is the rule of law that if the federal government, through Congress, has enacted legislation on a subject matter, it will be controlling over state laws.[5] Therefore, when state and federal laws are in conflict, the preemption doctrine allows federal law to “reign supreme.” It is important to remember that ERISA is a federal law and receives priority. ERISA Controls!             ERISA Section 514 preempts all state laws that relate to any employee benefit plan. There are a few enumerated exceptions where state laws survive despite the fact that they may relate to an employee benefit plan. These exceptions include state insurance, banking, or securities laws, generally applicable criminal laws, and domestic relations orders that meet ERISA’s qualification requirements. There is a three-part analysis used to determine whether ERISA preempts state law. First, preemption is presumed if a state law “relates to” any employee benefit plan. Second, state law relating to employee benefit plans may be protected from preemption under ERISA if it regulates banking, securities, or insurance matters. Finally, the last step of the preemption analysis concerns something called the “deemer” clause. This clause provides that state insurance law can’t operate on self-funded benefit plans of employers. In the third prong of the analysis, state insurance regulation may be saved only to the extent that it regulates insurance companies or contracts. Accordingly, a state may not “deem” (hence “deemer clause”) than an employee benefit plan is an insurance plan in an attempt to avoid preemption if the plan itself would not otherwise meet the standards as an insurance company or contract. Employer Securities and Fiduciary Duty Employer securities are common stock issued to employees covered by a retirement or other covered plan by an employer. In most cases, these securities are traded on a national exchange which is registered with the United States Securities and Exchange Commission (“SEC”). ERISA Section 404 contains a standard that requires a fiduciary, which is usually the employer who is conferring the benefits upon its employees, to act for the exclusive benefit and in the best interest of plan participants and beneficiaries. A fiduciary is also required to act with due care, skill, and prudence. When employers fail to meet their fiduciary duties under ERISA, participants and beneficiaries will harmed. Because of the adverse effects that breaches of fiduciary duties have on plan holders, courts have allowed those who have been harmed to file claims for ERISA violations. Remedies For Claims Under ERISA Under ERISA, remedies to a plaintiff are limited: plaintiffs cannot recover punitive damages, pain and suffering damages, or other kinds of state law damages. The typical outcome of a plaintiff challenging a benefit denial or loss of stock value will be the recovery of the amount of the benefit due under the terms of the plan or recover lost value. Attorney’s fees may also be recovered if reasonable and at the discretion of the court if a plaintiff can satisfy the legal standards of ERISA. In the Courtroom: To Jury or Not to Jury Because claims under ERISA are traditionally equitable, the parties involved are not entitled to a jury trial. Courts before the year 2002 almost uniformly ruled that jury trials were not warranted because plaintiff claims were “equitable” under English common law rather than “legal.” However, the Supreme Court has issued several decisions in recent years suggest that claims under ERISA can be viewed as legal or equitable, depending on the relief requested. In Great West v. Knudson, 534 U.S. 204 (2002) and Sereboff v. MAMSI, 126 S.Ct. 1869 (2006), the Supreme Court made it clear that claims by beneficiaries and participants under ERISA seeking to recover money based on violations of the terms of an ERISA plan are legal in nature rather than equitable-these trials were conducted with a jury as a result. Since these rulings, a number of federal courts have allowed jury trials for wrongful benefit denial claims or breach of fiduciary claims under ERISA, or have at least acknowledged that the right to a jury in these situations may exist. In considering whether the right to a jury trial exists in a particular case, the court “must examine both the nature of the issues involved and the remedy sought.” Granfinanciera, S.A., v. Nordberg, 492 U.S. 33, 42 (1989). Whether a party to a case involving an ERISA claim wants a jury or judge to hear and decide on the factual issues of their case depends on the facts and circumstances. Filing an ERISA Claim The first step in filing an ERISA Claim is to check your Summary Plan Description and Summary of Benefits and Coverage to be sure you meet your plan’s requirements to receive benefits. For example. Your specific plan may say that a waiting period must pass before you can enroll and receive benefits, or that a dependent is not covered after a certain age. Since each plan is unique, you need to be familiar with when your benefits begin running under the plan. It is also important to understand what your plan requires to file a claim. For this information, you should look to the Summary Plan Description or claims procedure booklet-this information should be provided by the provider of the plan. Once you submit your claim, you’ll have to be a bit patient and wait for an answer: your claim will either be accepted or denied. Claims are denied for various reasons: you may not be eligible for benefits or the services you received are not covered by your plan, or maybe the plan simply needs more information about your claim. If your claim is denied, it is not over: you can still file an appeal, and you have at least 180 days to do so (check your Summary Plan Description or claims procedure to see if your plan provides a longer period). Use the information in your claim denial notice in preparing your appeal. Be sure to include in your appeal all information related to your claim and get it to the person specified in the denial notice before the end of the 180-day period. In the process of an appeal, your claim must be reviewed by a new individual who looks at all the information submitted and further consults with qualified medical professionals if a medical judgment is involved. This new reviewer cannot be the same person who made the initial decision to decline your claim. The timeframe for a plan to review your appeal varies based on the type of claim filed. These steps can seem overwhelming, especially if you have never filed a claim before. This is why it is recommended to hire an attorney who is familiar with ERISA and surrounding laws to assist you in these crucial steps to ensure that you receive the best possible outcome.   ERISA Violations and Claims: Contact AF&T There are protections under ERISA for employees who pay too much for company stock, encouraged by their employees to invest through employee stock ownership plans or their 401(k). This protection goes beyond securities fraud laws. ERISA is complex and bringing a claim for ERISA violations can be overwhelming. Luckily, AF&T Law has experience handling private ERISA claims involving securities fraud and denial of benefits. If you have been denied benefits or have lost stock value as a result of an employer’s breach of fiduciary duty and would like to speak to an attorney, please contact please contact Atara Hirsch Twersky at

Atara Twersky, is of counsel at AF&T.  Atara is also the bestselling author of the children’s book series, Curlee Girlee, inspired by her own young curly haired daughter and written for all curly girls in an effort to ensure they love themselves and their hair exactly as it is, understanding that their hair is part of a greater legacy they share with those who came before them.  You can find out more about Atara here. Listen to other podcast episodes Pensions and Investments podcast with Atara Twersky here  or wherever you listen to your favorite podcasts!

[1] Pension Benefit Guaranty Corporation. “History of PBGC.” Accessed May 12, 2021. [2] Chicago Tribune. “Teamsters Loans to Mafia Detailed.” Accessed May 12, 2021. [3] Internal Revenue Service. “Choosing a Retirement Plan: Defined Benefit Plan.” Accessed May 11, 2021. [4] U.S. Department of Labor. [5] “Preemption.”