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How ERISA Protects Your Retirement

How ERISA Protects Your Retirement

Many of us have retirement account and or benefits related to our job. So how do we know what our rights are and how we can protect them? There is one specific law that was designed to help and it’s called the Employee Retirement Income Security Act of 1974, or ERISA.

Without ERISA, workers savings and benefits would go unprotected and the possibility for problems would exist. For example, highly paid executives could take more than their fair share of benefits while the average worker would get nothing. Or, companies lure recruits with benefits that they could never actually get because the obstacles for obtaining retirement could never be met.

Here’s a brief overview of how ERISA protects workers’ retirement benefits:

How ERISA Protects Employee Benefits

While employees own their own contributions to retirement accounts, they usually have to work for a specified period of time before they fully own their employer’s matching monetary contributions. 401K contribution plans are favored because of the ability to leave one organization with some benefits and change to one or more other companies before they retire.

In defined contribution plans, employees are vested in employer contributions within six years. ERISA protects workers by requiring the choice of two vesting schedules:

1) Vesting is 100 percent complete after three years.

Or,

2) Employees can be partially vested on a six-year graduated schedule that begins with 20 percent vesting after two years, incrementally increasing each year to full vesting at six years.

ERISA Keeps Retirement Funding Safe

ERISA law also forces companies to set aside funds in an account separate from company assets. These funds must be earmarked for employee retirements, so that they cannot be drained by dishonest or unscrupulous accounting practices. Accordingly, the money in pension plans has to be in a separate trust so that the money isn’t reachable by the company’s creditors. So that if the company loses assets, the money for retirement is still safe.

What Is A Fiduciary Duty?

Providing a retirement plan requires time and expenses to run the plan. Retirement plans can also be a huge liability for employers because there is a tremendous amount of responsibility for the people acting on behalf of the plan. The fiduciary duty is the financial, moral and ethical responsibility of your employer to make decisions about hiring a retirement plan provider, as well as selecting the investment options available to participants.

ERISA Provides Stricter Standards

Recently, the Department of Labor, announced that it will be taking a second attempt at adding a proposal of a new rule expanding the definition of who can serve as a fiduciary for retirement plans. The level of care required by everyone advising retirement plans and IRAs could change drastically if the new rule gets enacted.

Under the current rule, there is a five-part test to determine whether an adviser is a fiduciary. One example is that advisers must advise on an regular basis in order to be considered a fiduciary under a retirement plan.

If the new rule passes, anyone advising a plan could be considered an ERISA fiduciary. According to experts this could be dangerous. Moreover, if the DOL does indeed make anyone advising on retirement plans a fiduciary, it will have to issue some sort of exemptions so that brokers and other commission-based advisers are not forced out of business because of the additional expense and liability.

Contact J. Price McNamara Today For Your ERISA Questions

If you have an ERISA insurance issue, you most likely will need an experienced attorney who knows how to deal with these types of cases. ERISA law can be extremely complicated and the results of your case could mean significant changes for your retirement. For this reason, only an attorney with knowledge of the appropriate ERISA laws can help you get you the outcome you deserve for your case. J. Price McNamara has been practicing law for many years and has handled many cases just like yours. The legal team at the Law Offices of J. Price McNamara is waiting to help you with your ERISA case. Call us today to schedule your free case review and get an experienced insurance attorney on your side.

An Introduction To ERISA Law

Signed into law nearly 35 years ago, ERISA, otherwise known as the Employee Retirement Income Security Act, has been a source of confusion to many ever since. ERISA was originally set in place as an employee protection law, but experts claim it has the opposite effect at times.

Here are some basic facts about ERISA law and how it could be impacting you:

What Is ERISA Law?

ERISA stands for The Employee Retirement Income Security Act of 1974. ERISA establishes minimum standards for retirement, health, and other welfare benefit plans including life insurance, disability insurance, and apprenticeship plans.

Why Was ERISA Enacted?

The original purpose of ERISA was to address significant problems with corporate retirement plans. One major example of the problems happened when the Studebaker Motor Company went bankrupt, leaving their pension plan, workers and employees with no money and no ability to get recourse.

Are there any recent modifications to ERISA that I need to know about?

ERISA has been amended at least 40 times since it was passed over three decades ago. However, most of the changes address pension provisions of the act. Modifications include changes in the medical coverage (Consolidated Omnibus Budget Reconciliation Act of 1986) and HIPAA (the Health Insurance Portability and Accountability Act of 1996) and coverage providing pension divisions and medical coverage for children after divorce.

Who Administers ERISA?

ERISA is administered by the Employee Benefits Security Administration (EBSA), a division of the U.S. Department of Labor (DOL). Complaints, concerns, and questions about ERISA laws can be directed to your local offices.

Who Must Abide By ERISA Law?

ERISA laws only apply to private employers (this excludes government employees) that offer employer-sponsored health insurance coverage and other benefit plans to employees. Contrary to what many people would think, ERISA does not require employers to offer pension and retirement plans; it only sets standards for benefits that employers chooses to offer their employees. Additionally, ERISA laws do not apply to privately purchased, individual insurance policies or benefits purchased outside of work provided plans.

What Are The Key Provisions Of ERISA?

Reporting and Accountability: ERISA standards require detailed and prompt reporting and accountability to the federal government. This helps ensure your plan is accurately and honestly administered.

Conduct: ERISA rules regulate conduct for managed care (HMOs) and the company who is financially responsible for your plan’s administration.

Safeguards: ERISA requires a written policy for how claims should be filed, as well as a written appeal process for claims that are denied under your plan. ERISA also requires that your claims and appeals be heard and dealt with in a fair and timely manner.

Financial and Best-Interest Protection: ERISA acts as a safeguard to assure that plan funds are protected and delivered in the best interested of the plan members. ERISA also prohibits discriminatory practices for distribution or acceptance of plan benefits for qualified employees.

Disclosures: Certain disclosures must be provided to plan participants (i.e. what benefits are offered, the rules for getting those benefits, the plan’s limitations, and other guidelines for obtaining benefits);

Come See J. Price McNamara For Your ERISA Case

If you or a loved one are dealing with an ERISA issue, you need an experienced attorney who knows how to deal with this types of cases. ERISA law can be complicated and most insurance companies have teams of lawyers working for them. For this reason, only an attorney with knowledge of Louisiana and ERISA laws can help you get you the outcome you deserve for your case. J. Price McNamara has been practicing law in Louisiana for many years and has handled many ERISA cases. With a wealth of knowledge and respect from both the legal and surrounding community, J. Price McNamara can provide the legal representation that you need. Call our office today to schedule your free ERISA case review and get an experienced attorney working for you. The law may limit the time you have to file your case, so don’t wait! Call us now.