What is ERISA and what does it cover?
“ERISA” is the Employee Retirement Income Security Act which is designed to protect both retirement plans and welfare benefit plans. This is incredibly important since the Department of Labor found that about 54% of Americans earn retirement benefits through work and about 59% earn health benefits.[1]
ERISA is an attempt to protect plan participant’s benefits from “mismanagement and abuse: by holding those in charge of the savings to a high standard of care. [2] Those in charge of the plan must act in the plan participant’s best interest, give the participants the controlling documents upon request, and be transparent and accountable. It is also a federal law which “preempts” state law, meaning for the most part, state rules will not affect the claim.
In broad terms, to qualify as a ‘welfare benefit plan’ under ERISA, there must be a (1) plan, fund or program that is (2) established or maintained by an employer for the (3) purposes of providing at least one of the following benefits to employees: medical, surgical or hospital care/benefits, benefits in the event of sickness, accident, disability, death, or unemployment, apprenticeship or other training benefits, day-care centers, scholarship funds, prepaid legal services, holiday and severance benefits, and housing assistance benefits.
Since that is such a wide range of possible plans to cover, it is sometimes easier to define ERISA’s coverage by discussing which plans are not included under ERISA. Governmental and Church plans are not covered by ERISA. The governmental exception can include state run schools and insurance plans issued by municipal governments. The religious exception can also include religious schools, non-profit organizations, and sometimes hospitals. Another important exception from ERISA coverage is “Voluntary” insurance- meaning some ‘voluntary employee-pay-all’ type arrangements. This would be your employer allowing an insurance company to offer any interested employees a voluntary plan which they can purchase at full cost through pay-roll deductions. It is important that the employer not “endorse” these programs in order to qualify for the exceptions. There are other exceptions as well, including certain “payroll practices” exemptions and some tuition reimbursement plans.
Determining whether your plan is covered under ERISA is an incredibly important step in your claim process because it determines the rules the plan administrator must follow. If you are intending on claiming your benefits and need help determining the coverage of your plan or help with the process of receiving your benefits, please call an attorney at Bollwerk & Tatlow!