M. Erisa Benefits

Employer-sponsored health, pension, and profit-sharing plans are governed by the federal Employee Retirement Income Security Act of 1974 (ERISA). ERISA sets minimum standards for benefit plans, the vesting of benefits, and communication to plan participants and their beneficiaries. This includes.findlaw all plans, funds, or programs that provide medical, surgical, or hospital care benefits; retirement income or the deferral of income after retirement or termination (such as severance); or deferred compensation plans such as stock bonus and money purchase pension plans. The act covers six basic areas, including:

• Communications: what must be disclosed to employees, how it must be disclosed, and what reports must be filed with the federal government
• Eligibility: which employees may participate in a benefit plan
• Vesting: rules regarding when and to what extent benefits must be paid
• Funding: what employers must pay into a plan to meet its normal costs and to amortize past service liabilities
• Fiduciary responsibilities: how the investment of funds must be handled and the responsibilities of the plan administrators to oversee the plan and plan benefits
• Plan termination insurance: the availability of insurance to protect the payment of vested benefits The law does not require employers to establish pension or profit-sharing plans. Once they do, however, virtually all private employers are regulated by ERISA in one form or another. The first step to understanding and enforcing your ERISA rights is to ask for details regarding the nature of your benefits when you are hired. You are entitled to an accurate, written description of all benefits under federal law. Be aware of all plans, funds, and programs that will be established on your behalf. These may include the following:
• Defined contribution plans (e.g., profit-sharing plans, thrift plans, money purchase pension plans, and cash or deferred profit-sharing plans). All these plans are characterized by the fact that each participant has an individual bookkeeping account under the plan which records the participant's total interest in the plan assets. Monies are contributed or credited in accordance with the rules of the plan contained in the plan document.
• Defined benefit plans. These are characterized as pension plans that base the benefits payable to participants on a formula contained in the plan. Such plans are not funded individually as are defined contribution plans. Rather, they are typically funded on a group basis.
• Employee welfare benefit plans. These are often funded through insurance and typically provide participants with medical, health, accident, disability, death, unemployment, or vacation benefits.
• ERISA plans. These may not be as definite as the plans above. Rather, if the employer communicates that certain benefits are available, who the intended beneficiaries are, and how the plan is funded, the employer may be liable to pay such benefits even in the absence of a formal, written plan.

Counsel Comments:An investigation by the U.S. Department of Labor uncovered hundreds of companies misusing and diverting 401(k) employee pension programs. In 401(k) plans, workers save and invest their own money for retirement through automatic savings programs set up by their employers. When the plans are operated correctly, workers determine how much they contribute, the employer withholds the stipulated amount from employee paychecks, and the company forwards the money to a plan administrator, who invests worker contributions in a manner selected by the worker. The Department of Labor discovered that many small and midsize companies violated plan rules and federal law by delaying payment to plan administrators, diverted funds to pay other corporate expenses, or stole the money outright and never reported the contributions. In a recent 401(k) amnesty plan, the Department of Labor reported that 170 companies admitted they failed to deposit $4.8 million in the retirement accounts of 16,800 workers. The money came from technology firms, law firms, doctors' offices, credit unions, and manufacturers in 38 states and payments ranged from $43 to $200,000. Some companies admitted using the money to cover business expenses. (Note: Money withheld from workers' paychecks must be deposited to 401(k) accounts within 15 business days after the end of the month the money is withheld. For more information, call 202-219-9247 to get a copy of the free publication "Protect Your Pension" published by the Labor Department.)

Tip:The best way to avoid such problems is to monitor and regularly scrutinize reports given to you by the employer concerning your current benefits. If your returns show constant losses, plan officials may not be investing your money properly. Speak to management about how you want your money invested. If your statements are coming late or at odd intervals, check with your benefits department to find out why. Demand such reports if they are not periodically forthcoming. If your retired friends say they can't get the pension plan to pay them what's due, start checking further. Always request such reports when you believe the company is having financial difficulties, such as when paychecks are not being distributed on time. Most important, keep track of how much you're contributing to the pension and then match your records to the reports you receive from the plan. These statements should indicate the amount you and your employer have contributed, plus the rate of return you've earned on your investments. If the numbers don't match, it is possible (especially with small companies) that the employer is illegally holding or diverting your contributions.

To safeguard benefits, ERISA mandates that assets in a beneficiary's pension be virtually "untouchable." This is accomplished by requiring that plan administrators file numerous reports with the U.S. Department of Labor, the Internal Revenue Service, and the Pension Benefit Guaranty Corporation (a federal agency located in Washington, D.C.), including plan descriptions, summary plan descriptions, material changes in the plan, description of modifications of the terms of the plan, an annual report (Form 5500), an annual registration statement listing employees separated from services during the plan year, and numerous other reports for defined benefit plans covered by the termination insurance provisions with the Pension Benefit Guaranty Corporation.

Demand a copy of the employer's pension and/or profit-sharing plans from the plan administrator if the employer refuses to furnish you with accurate details. (Note: You may have to pay for the cost of photocopying said plans when requesting them.) ERISA provides that plan participants are entitled to examine without charge all plan documents filed with the U.S. Department of Labor, including detailed annual reports and plan descriptions. If you request materials and do not receive them within 30 days, you may file suit in federal court. In such a case, the court may require the plan administrator to provide the materials and pay up to $100 a day until you receive the materials, unless the materials are not sent for reasons beyond the control of the administrator.

Tip:If you are fired just before the vesting of a pension (e.g., two months before the vesting date), argue that the timing of the firing is suspect and that public policy requires the employer to grant your pension. If the employer refuses, consult an experienced employment lawyer immediately.

Contact the plan administrator immediately to protect your rights if your claim is denied or if you suspect there are problems with your plan. Under federal law, every employee, participant, or beneficiary covered under a benefit plan covered by ERISA has the right to receive written notification stating specific reasons for the denial of a claim. You have the right to a full and fair review by the plan administrator if you are denied benefits.

If you suspect the company has not acted properly with respect to your benefits, inquire about your account with the plan administrator. Determine whether the amount of each payment corresponds with the amount that was deducted from your paycheck and reflects any promised matching contributions. If you are not satisfied with the answers, contact your nearest Department of Labor office to discuss the matter with a representative. Request an investigation on behalf of you and your coworkers where warranted.

If you have a claim for benefits that is denied or ignored in whole or in part after making a request to a plan administrator, speak to a lawyer and consider filing a lawsuit in either state or federal court. If it should happen that plan fiduciaries misuse a plan's money, or if you are retaliated against for asserting your rights (such as being demoted, reassigned, or fired), seek assistance from the U.S. Department of Labor, or file suit in federal court. The court will decide who should pay court costs and legal fees. If you are successful, the court may order the employer or person you have sued to pay these costs and fees.

Tip:If your company goes out of business, files for bankruptcy, or has no assets, many states require the owners (i.e., stockholders) and officers to be personally liable to repay pension and other retirement benefits. Thus, all may not be lost if you discover your benefits were diverted and the company goes out of business. Speak to a lawyer about this point where applicable.

The Pension Benefit Guaranty Corporation has created an office to help workers trace their pensions. By law, a pension plan that terminates is required to make only one attempt to get in touch with workers. The Pension Benefit Guaranty Corporation can assist you by making repeated attempts to find the plans of employers that have gone out of business. Contact this agency in Washington, D.C. and supply it with copies of any plan summaries and plan identification numbers, which are often printed on such papers. Permanently save all plan documents and summaries because you never know when the information will come in handy to document and enforce a claim.

Speak to a benefits lawyer if your company orally modifies any plan benefits, if a summary description does not accurately depict essential elements of the plan, or if a division of the company you are working for is sold and the new company offers far less severance and other benefits than previously promised. When companies merge and workers are laid off or denied promised benefits they previously enjoyed, issues of severance and other post-termination and on-the-job benefits should be scrutinized by a competent lawyer to determine whether ERISA violations have occurred.