• Is Your Plan Subject to ERISA? (Part 1 of 2)
  • October 22, 2004 | Author: Margaret R. Bernardin
  • Law Firms: Ford & Harrison LLP - Orlando Office; Ford & Harrison LLP - Tampa Office
  • The Employee Retirement Income Security Act of 1974 ("ERISA") imposes a number of responsibilities on employers who sponsor employee benefit plans. For example, ERISA requires that employers:

    • File annual information returns (Forms 5500) with the Department of Labor
    • Provide summary plan descriptions and summary annual reports to participants
    • Retain plan records
    • Satisfy minimum participation, vesting and benefit accrual requirements
    • Comply with rules regarding the timing and form of benefit payments
    • Observe applicable minimum funding rules
    • Establish written plan documents
    • Hold plan assets in trust
    • Establish and follow reasonable claims procedures
    • Refrain from interfering with an employee's exercise of his or her rights
    • Provide health care continuation rights to qualifying individuals
    • Comply with limits on preexisting condition exclusions
    • Avoid discriminating against individuals based on their health status
    • Pay premiums to the Pension Benefit Guaranty Corporation for defined benefit plans

    In addition, ERISA requires that any fiduciaries of an employee benefit plan act in the best interests of participants and in accordance with the governing plan documents, fulfill their responsibilities to the plan in a prudent manner, diversify the investment of plan assets, and refrain from self-dealing.

    Any individual who willfully violates a provision of ERISA can be fined up to $100,000 ($500,000 for companies) or imprisoned for up to ten years. In addition, participants and beneficiaries, as well as the Secretary of Labor, can bring civil actions to enforce specific provisions of ERISA, recover benefits due under the plan, or otherwise obtain relief for violations, and courts have the discretion to award attorney's fees and costs as part of any suits that are filed. There are also specific monetary penalties that can be assessed for specific failures. For example, a court can award participants who requested information regarding the plan but did not receive it up to $110 per day per participant. Finally, plan fiduciaries can be held personally liable if a plan suffers a loss due to their failure to follow the requirements of ERISA.

    ERISA applies to plans that qualify as "employee pension benefit plans" or "employee welfare benefit plans." In the October issue of Benefits Review, we will discuss what types of plans fall within those definitions.