The Employment Retirement Income Security Act of 1974 (ERISA) is a federal law that establishes guidelines for the administration of employee benefit plans such as health insurance and pension plans. ERISA creates a uniform standard that applies nationwide to protect plan participants and beneficiaries from losing their benefits. Before ERISA, employees risked a lack of funding and mismanagement of their retirement and plans and other benefits. Even worse, employers could take back those benefits due to bankruptcies or financial hardships. ERISA imposed safety mechanisms that protect these plans. Understanding ERISA is an important part of protecting your rights. Federal protections come from a law known as ERISA. Policyholders should understand their rights under ERISA (and any applicable state laws). These rights allow policyholders and beneficiaries to hold plan managers accountable for mismanaged funds, improperly denied claims and other misconduct that keeps them from the benefits to which they are legally entitled.
Table of Contents
- What Is ERISA?
- What Employers Are Subject to ERISA?
- How Does ERISA Protect Policyholders?
- Covered benefits
- Exceptions To ERISA
- The COBRA Amendment After Job Loss
- If Your Long-Term Disability Insurance Company Denied Your Claim
- ERISA Claim - Two-Stage Process
- Finding the Right ERISA Lawyer
What Is ERISA?The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law passed by Congress to protect retirement savings. ERISA does not just apply to retirement income benefits. It also covers claims for short-term disability, long-term disability, health insurance, and life insurance. If plan sponsors do not manage plan funds properly, policyholders can find themselves without coverage when needed, through no fault of their own. ERISA created particular legal protections to prevent misuse of retirement funds. There are certain things that ERISA does not do. The law does not require employers to establish a pension plan, and it does not set a minimum amount of benefits that an employer must offer. ERISA instead regulates the management of a pension plan once established. The law has specific provisions to prevent mismanagement of a plan, misappropriation of funds, abuses of power, unfair claims denials, and other misconduct.
What Employers Are Subject to ERISA?ERISA applies to private employers that offer certain benefits plans to their employees. There is no minimum number of employees an employer must have for ERISA to apply. Having just one employee can trigger the application of ERISA. However, government employers and churches are generally not subject to ERISA guidelines. ERISA does not mandate that employers provide pensions, health care, or other fringe benefits, but rather sets forth guidelines to follow when they offer these packages. The requirements ERISA sets forth create a minimum standard for employers who provide these packages to follow.
How Does ERISA Protect Policyholders?The Department of Labor reports on specific rights that ERISA provides to policyholders for their protection:
1. The right to receive informationMost participants in a retirement plan are familiar with the frequent notices they receive. ERISA requires plan administrators to provide participants with information about:
- The plan and its benefits
- Insurance contracts, collective bargaining agreements, annual reports filed with the DOL, and other documents about the plan
- Documents on how the plan operates (such as summary plan descriptions and annual reports)
- Annual financial reports
- Notification (either electronically or in writing) of the decision
- The specific reasons for the decision (including the particular plan provisions used to deny the claim)
- A description of any additional documentation or necessary that will be necessary to correct the claim.
- A description of the plan’s review or appeals procedures and a statement explaining that the claimant has the right to bring a lawsuit
- All documents used to make the determination (including the plan administrator’s entire Administrative Record)
2. Fiduciary responsibilitiesWhen a person has the legal right to manage someone else’s money, the law imposes special obligations on the manager. These are known as fiduciary responsibilities. Trustees administering trust assets, public officials handling tax dollars, and investment professionals managing hedge funds are all subject to fiduciary obligations. ERISA also imposes fiduciary responsibilities on companies that administer retirement and insurance plans. Different fiduciaries have different obligations. Fiduciary responsibilities often come directly from a statute that lists precise rules like ERISA. The Act requires a manager to run any plan subject to ERISA to provide participants with the benefits owed to them. (There are also costs associated with running a plan, and managers must run plans prudently to avoid unnecessary expenses.) This exclusive purpose prevents managers from putting their financial interests ahead of participants'. If there is any conflict of interest, plan participants have the right to sue the manager for the breach of fiduciary obligations. Plan participants may also have the power to sue for losses that occur due to negligence. Plan managers must act as any prudent investor will. Managers must diversify plan assets to reduce the risk of loss and perhaps direct the plan entirely of those assets that lose value. It can be challenging for plan participants to find evidence that a manager breached their fiduciary obligations. Most plans manage vast sums of assets with many complicated financial transactions. Often, managers hide wrongdoing with a trail of burdensome paperwork, but this does not mean it should go unpunished. Some professionals handle these specific issues. Forensic accountants can carefully review all documentation for evidence of wrongdoing - or discover whether it contradicts the claims made by plan administrators. Financial experts can testify about the actions a prudent investor should have taken with plan assets. It often takes a team of financial and legal experts, but plan participants can win compensation for losses they suffer when fiduciaries violate their obligations.
3. Grievance and appeals proceduresWhen facing the power of a large insurance company or retirement plan, it can feel impossible to challenge a claim denial. These companies have a powerful machine of claims adjusters, supervisors, and lawyers who all work together to deny as many claims as possible - then pay as little as possible on the claims they can’t deny. Policyholders and plan participants are at a disadvantage when facing this robust infrastructure. Despite the power imbalance, the insurance company is not immune from liability. ERISA gives plan participants the right to challenge unfair claims decisions by a plan administrator. Plans subject to ERISA must have clear procedures for grievances. Participants must receive notice of these procedures. Often, a challenge starts with the company’s internal appeals process. The internal process allows claimants to appeal a decision up the chain of command within the company. Internal appeals generally start with a supervisor reviewing the claim adjuster’s initial determination. If the supervisor denies the claim, the participant is entitled to know why and receive the specific policy language that the company uses to deny the claim. The beneficiary might then escalate the claim to the next level of internal appeal within the company. The next level can be a panel of several reviewers. If the appeal raises specific medical issues, a doctor might review it, and a lawyer might review specific legal matters. These steps are different at each company. The process is confusing, so ERISA requires that plan participants receive information about the plan’s internal appeals process. After exhausting all internal appeals within a company, the appellate authorities will still deny some claims. Even a final claim denial from the company is not the end of the appeals process. ERISA also gives plan participants the right to sue ERISA plan administrators to resolve their appeals in court. This critical protection allows handling appeals independently of the plan administrator so a third party can determine a participant’s rights with no financial stake in the appeal outcome.
4. The right to sueThe right to sue is one of the most important legal protections that ERISA affords. Without it, denied claims might leave plan participants with no recourse other than the plan administrator’s own internal appeals process. Judges and juries act as essential third parties that prevent plan administrators from denying coverage when owed. ERISA even requires participants to be provided with written notice that they have the right to sue to challenge adverse claims decisions. The first step in ERISA litigation is determining which parties should sue whom. Though the question seems straightforward, case law has complicated this legal question (known as standing). On the plaintiffs' side, a plan participant must show a personal financial injury to have the standing to sue. This rule is the result of a 2020 ruling by the Supreme Court. Many potential defendants should be a party to an ERISA lawsuit on the defense side. An ERISA plan is a separate legal entity that can sue or be sued. Depending on state law and current case law, a participant can also sue the employer and plan administrator, but this is not always the case. Once you know the parties to the case, the plaintiff must specify specific legal harm they have suffered. ERISA generally allows participants to sue for benefits owed, but state claims might enable a participant to sue for related financial losses or even punitive damages to punish the plan administrator for egregious conduct. These claims also allow an ERISA plaintiff to recover their attorney’s fees. This right is essential - generally, each party must pay their own attorney’s fees, and this can leave plan participants on the hook for thousands of dollars in attorney’s fees spent to get the benefits they owed in the first place. Plaintiffs must be sure that the initial complaint they file (a document that formally starts a lawsuit) lists all potential legal harms they have suffered. An ERISA lawyer ensures that their client has access to all compensation owed by identifying all potential claims. Parties to a lawsuit may settle the claim out of court at any time. In some cases, simply filing a lawsuit is enough to get a plan participant the benefits owed. The plan administrator will drag the case through lengthy litigation in other cases. While this can take longer and be more expensive, it is sometimes the only way for participants to get their benefits. The attorneys will investigate the case evidence (discovery) and formally exchange it with the other side (disclosure). The discovery and disclosure process often reveals information that enables the attorneys to reach a fair settlement. If not, the case can go to trial, and a judge or jury can determine the participant’s rights under their plan. The parties can also appeal these verdicts through the court system like other legal claims.
Covered benefitsPart of understanding ERISA is knowing the benefits the law covers. ERISA covers a broad range of employee benefits including:
- Disability insurance
- Life insurance
- Accidental death and dismemberment insurance
- Health insurance
- Pension plans
- Long-term care insurance
- Training programs
- 401K plans
Reporting and Disclosure RequirementsEmployers must submit reports to the federal government. In addition, employers must provide employees with information about their benefit plans. These disclosures should include information regarding a summary of the benefits, how to obtain the benefits, and any plan limits.
Administration and Enforcement of ERISAPlan administrators are responsible for managing employee benefit plans and owe plan participants a fiduciary duty, meaning they are held to certain standards of conduct that they must meet to avoid liability. Plan administrators should act in the best interest of plan participants by investing funds prudently to avoid substantial losses. These standards serve to protect employees from the poor management of their retirement funds. Plan administrators should provide employees with summaries of their benefit plans and notify them of any changes to their plans. The U.S. Department of Labor (DOL) and the federal courts enforce ERISA. A subsection of the DOL called the Employee Benefits Security Administration (EBSA) investigates potential ERISA violations.
An Attorney Can Help Employees Understand ERISAMost employees rely on their retirement plans for financial support in the future. If your retirement plan is jeopardized in any way, it can devastate you. A knowledgeable attorney can advise you regarding your rights under ERISA. ERISA is a complicated law to understand and has a history of being amended frequently. Employees who have questions or concerns regarding ERISA should not hesitate to seek the assistance of an attorney. An attorney has the experience needed to help you understand ERISA.
Long-Term Disability Claims Under ERISAIf you experienced an illness or injury, you might develop physical or psychological conditions that entitle you to long-term disability under ERISA. Connecting with a disability insurance attorney can help support the best outcome on your claim. The Employee Retirement Income Security Act of 1974 is a federal law that establishes minimum standards for the majority of the voluntary and employment-sponsored retirement and health plans within private industry. ERISA should protect the individuals who enroll in these plans. One of the key features of ERISA is the role of information. ERISA empowers you to know the important data related to your plan, including its features and funding. ERISA can be a source of stability and support in your many years of retirement, and if your benefits are denied or you need to apply, reach out to an attorney today for more information about how it will work for your particular plan.
Long-Term Disability Under ERISA and How It Affects YouERISA applies to long-term disability claims for those covered works for private companies. Congress has also amended ERISA many times in ways that might affect the retirement or disability insurance benefits you receive. When you have a group long-term disability claim, a disability attorney with experience processing ERISA cases will know how the federal statute applies to your circumstances. Under ERISA, if you experience the termination of long-term disability benefits, the plan must provide claimants with copies of documents, records, and other information linked to the claim for your benefits. A disability attorney can effectively employ this information to navigate the appeal, which we’ll discuss below after providing more information about ERISA and how it can provide value to you and your family.
Exceptions To ERISAERISA applies broadly to most private retirement and benefits plans. Despite this, there are a few notable exceptions where ERISA does not apply. These plans include:
- Group health plans established by governmental entities or by churches for their employees
- Plans maintained solely to comply with workers' compensation, unemployment, or disability laws
- Plans maintained outside the United States primarily for the benefit of nonresident aliens or unfunded excess benefit plans
Retirement Protections Under State LawsAccording to the Pew Charitable Trusts, all fifty states have legal protection for public pensions. Some states enact this protection in a constitution or state statutes. Other states rely on judicial rulings that create a legally enforceable precedent for retirement protections. Some states use a combination of these protections. The state laws that apply to your pension plans will depend on where you work, live, and contribute to the plan. State laws also protect pensions by restricting the potential changes. (A research paper out of Boston College explored exactly how these restrictions work - and whether they do make it more challenging to place retirement funds at risk.) The federal ERISA law, state laws, and contractual provisions work together to protect plan participants. Plan participants must enforce these legal rights when violated: first, to get the benefits owed, but second, to prevent the plan from mismanaging assets or denying claims from other innocent plan participants.
ERISA Requires Proper Notice to Employees and Plan ManagementYour employer can’t keep information from you about the retirement plan that you voluntarily enter. Under ERISA, your employer must provide you with plan information, including key information on features and funding. The management and managers of your retirement plan and funds also have fiduciary responsibilities to you in managing your assets. We’ll explain more later on, as when a breach occurs, you may pursue a claim against the breaching party for your damages. With an experienced group long-term disability insurance claim lawyer at your back, you have the greatest likelihood of either an advantageous administrative appeal, out-of-court settlement before trial, or a favorable judgment in court.
If You Have a Grievance with Your Plan, ERISA Offers a SolutionPlans must establish a grievance and appeals process for plan participants to obtain proper benefits. Participants also have the right to sue for benefits and the breach of fiduciary duty. These opportunities under ERISA ensure that parties manage your benefits well and conscientiously. This includes not denying valid claims for short-term or long-term disability insurance benefits. If you experienced issues gaining access to the benefits of your plan, or if the benefits you receive are less than you deserve, an ERISA attorney can file your grievance, process your appeal, and, if needed, seek your benefits in court.
You Have the Right to Sue for Your BenefitsWhen your insurance plan is not paying out the benefits that you deserve under the law, you have the right to sue under ERISA. Through ongoing amendments to ERISA, the law establishes additional benefits outside of disability, with one in particular related to healthcare insurance having provided an important benefit to those retiring or experiencing the loss of a job. An amendment to ERISA established COBRA, the Consolidated Omnibus Budget Reconciliation Act. The benefit of ongoing health insurance for you and your family following a change in your job status can mean the difference between life and death. If you are denied your COBRA coverage, reach out to an attorney today to protect your rights.
The COBRA Amendment Can Entitle You to Ongoing Insurance After Job LossCOBRA provides some workers and their families who have lost their health benefits from their group health plans to continue their plan for a limited period. This limited coverage period is provided in certain circumstances related to voluntary or involuntary job loss or a reduction in the number of hours worked. You can take advantage of the benefits available to you under COBRA in a wide variety of situations outside of job loss. While your employer may claim that you are not entitled to ongoing participation in the group health plan following job loss, this may not be the case. While you may have to cover up to 102 percent of the cost under the ERISA amendment, you may still maintain your insurance. An experienced benefits attorney can help you determine whether you have a claim and the best path to take to achieve a beneficial solution.
Significant Life Events Can Entitle You to COBRA Health CoverageThe loss of a job or significant change in working hours can substantially change your ability to cover the cost of private insurance. One key benefit of employment is access to the group health plan, with the option of COBRA applying to employers with twenty or more employees in the prior year. If you have lost your job, had your hours reduced, or even been between jobs, COBRA is available to you. Additionally, if you have experienced a significant life event such as a death in the family, divorce, or other substantial events, you may be entitled to COBRA coverage. If you work for an employer covered by COBRA, they are required to provide you notice. Failure to provide notice, or the denial of rightful claims, may entitle you to damages. Healthcare for you and your family is a very serious affair, and an experienced insurance lawyer knows how to best advocate for your interests and your continued health through access to COBRA.
If Your Employer Breached Its Fiduciary Duty, You Can Sue Under ERISAA fiduciary duty means a special duty of care in a specific situation. With your retirement plan, the company that manages your plan generally must maximize the return while minimizing the risk of loss. If you suspect a breach of the fiduciary duty related to your retirement account, you might ask: Was the plan diversified? Were the assets selected for the plan stable? Did the selected assets produce a positive return that reflects the general rate of return in the market? If someone made risky decisions, with what proportion of the portfolio was the risk employed? You might not understand the information provided to you upon request or how the fiduciary duty was exercised. An attorney with experience processing retirement plan claims knows the norm and when you should deserve damages.
If Your Long-Term Disability Insurance Company Denied Your Claim, You May AppealWhen you receive a denial of your valid long-term disability claim, ERISA protects your rights by providing for an appeal process. As we discussed above, you have a right to documents, records, and other relevant information related to your claim. Your group long-term disability insurer must provide this free of charge, but the process will vary from plan to plan, and an experienced attorney behind you can get the most relevant information then use it as evidence to support your claim. If your claim was denied or approved and later terminated because the insurance company deemed you healed, you can apply this information to your administrative appeal. The right to appeal is time-sensitive, and you have only a limited time during which to file. Knowing the deadlines and time allowed to file will determine whether you can move forward with your claim or miss out on your chance. Under ERISA regulations, you are entitled to a minimum of 180 days to file an appeal under your claim.
A Disability Attorney Can Meet the Deadlines in Your ClaimWhen you have a limited time to file a claim, an attorney will help you. Going through an accident or illness that causes long-term disability can create trauma and stress and naturally will take up quite a bit of your attention. Filing within the time allowed when you are busy recovering from injuries and dealing with the changes in your ability to work and earn can be difficult. While in some instances, you might get an extension, in general, if you miss the deadline with the ERISA long-term disability claim, you forfeit your rights to bring a claim or to later file a suit for the compensation you deserve. A group long-term disability attorney with experience in your area knows how to meet the deadlines in your case and achieve a better resolution sooner. Reaching out to an ERISA attorney as soon as possible after your injury or illness will support the quality of your claim through better evidence collection, superior negotiating, and the informed comfort that only an experienced disability attorney can provide.
Your ERISA Claim Can Follow a Two-Stage ProcessWithin the context of your ERISA appeal, the 180-day deadline is the first key piece of information, but it is also essential to recognize that there are two appeals. The first must be replied to by your disability plan within 45 days. While you may not extend your 180 days, the disability plan provider may get an additional 45 days under some circumstances. It must notify you of such an extension, and after 90 days, the plan must make an appeal determination. Some plans then require a second appeal for a final determination, and this can take quite a bit of time to process, especially if you don’t know the most efficient way to do it. Under ERISA, your disability plan cannot require more than two appeals before you may file a civil suit to seek what you deserve. A civil suit will enable you to recover damages that may include not only the denied value of the long-term disability insurance but also the costs of your attorney and court fees and other damages depending on the violations of your disability plan provider. Navigating the appeal process for your long-term disability with your insurance provider is complicated, and you will lose all of your benefits if you fail to meet any required deadlines. A disability lawyer who knows the process can best advise you on the process and advocate for your best outcome.
Finding the Right ERISA LawyerIt is difficult to understand ERISA and what it means for your benefits. Many employees make errors by missing deadlines or failing to appeal claim denials because they do not know how ERISA applies to their situations. Do not make this mistake instead, reach out to an experienced ERISA lawyer who knows your best options. When seeking legal help, always ensure that you find an ERISA law firm that handles ERISA disability cases. The process for claim filing and appeals differs from other disability benefits, such as SSDI. You want representation from someone with experience dealing with ERISA insurance providers and the federal court system if you need to file a lawsuit. Seek a consultation today. Since ERISA is a federal law, we can help you regardless of where you live. First, we can review your situation and:
- Advise whether you should qualify for benefits
- Help prepare and file your insurance claim if you did not already do so
- Handle all communications and negotiations with your insurer
- Review the reasons for a claim denial
- File an appeal with the insurance company within the necessary time frame
- Present strong evidence in support of your appeal
- File an ERISA lawsuit in federal court if the insurance company denies your appeal
- Handle the entire litigation process seeking the benefits or settlement that you rightfully deserve.