ERISA and Health Care
ERISA does not require a private employer to provide health insurance to their employees, but it does regulate the health benefit plan if it is offered. In recent years, amendments to ERISA have occurred, resulting in the following developments:
- Consolidated Omnibus Budget Reconciliation Act (COBRA). This provides extended, limited health care coverage to employees that leave a job and would otherwise lose their company-provided heath insurance.
- Health Insurance Portability and Accountability Act (HIPAA). This prevents a health care plan from denying coverage to an employee who may have a preexisting medical condition.
Protection of Vestment
In previous decades, an employer was sometimes able to deny a pension payout to an employee who left the company before they reached the age of 65, regardless of how many years this person had worked at the company. In order to prevent this from happening, the Pension Protection Act of 2006 was created. This mandates that any employee contributing to a pension after 2006 must be guaranteed vestment after three years of contribution.
Funding of Pensions
In order to prevent the types of cases that precipitated ERISA’s forming in the 1960s, ERISA also delineates the ways in which a pension should be funded. ERISA requires minimum funding amounts to be defined and maintained. It also requires employers to contribute enough money to keep the standard account from going below $0 at the end of the year.
ERISA defines the following four basic statutes:
Title I: Protection of Employee Benefit Rights.
- Employee participants must receive plan summaries
- Private employers must also provide plan summaries to the Department of Labor for review
- Upon request, an employer must generate a calculated summary of both accrued and vested pension benefits
- Certain types of transactions are prohibited between the employer and the fund
- Employers and investment managers possess required fiduciary responsibility to their plans
Title II: Amendments to the Internal Revenue Code Relating to Retirement Plans
- Establishes a limit to the amount paid to a beneficiary annually
- Allows for the creation of IRAs
- Plans cannot provide favorable, unequal benefits to company officers
- Joint-and-survivor benefits must be honored
- Rules regarding the maximum tax deduction allowed on a pension plan may be revised periodically
Title III: Jurisdiction, Administration, and Enforcement
Provides an outline for how ERISA guidelines should be enforced by the various government entities responsible for pension plan monitoring. Additionally, it establishes minimum standards that a person must meet before being hired by one of these departments, including two separate exams.
Title: IV: Plan Termination Insurance
Provides standards by which an organization may terminate its pension plan. These differ between single-employer plans and multiemployer plans. Additionally, the Pension Benefit Guaranty Corporation, or PBGC, was created by ERISA to monitor and ensure all stipulations of termination are followed.
Multiemployer plans must be terminated in one of the following ways:
- Amending their statutes so that no employee receives credit for service moving forward
- Allowing contributing employers to stop contributing to the plan or withdraw from it
- Convert the existing plan into a defined contribution plan.
There are also several ways in which a single employer may terminate their pension plan.
In a standard termination, an employer may terminate their plan as long as assets exceed liabilities. In the case that they do not, an employer may make contributions until the assets are equal or exceeding those liabilities. Once this has been established, annuity contracts must be purchased for all participating employees.
In what is called a distress termination, an employer must prove to the PBGC that at least one of the following is happening: the company is filing for bankruptcy, continuing the pension will result in business failure, or that a decrease in the workforce has made continuing a pension difficult for the business.
The PBGC can also terminate a single-employer plan in what is referred to as an “involuntary termination,” if it determines any of the following are taking place:
- The minimum contribution is not being maintained by the employer
- Benefits will not be paid at the culmination of the plan
- Long term business costs will become unreasonable if a plan continues.
A Minneapolis, MN ERISA Lawyer Will Protect Your Rights
If you are wondering if contacting an ERISA lawyer is the right decision, understand that they will make a major difference in the result of your case.
Under ERISA, you generally do not have a right to a bench trial or a jury trial. The entire foundation of your case will be determined on how the claim was managed during the claim process. Taking this into account, the significance of securing the assistance of a skilled Minneapolis, MN ERISA Lawyer who can guide you through claim process cannot be overstated.