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:
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.
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 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.
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.
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.
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.
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