September 2, 2011
ERISA is the most influential and far-reaching laws that most Americans have probably never heard of (unless you practice in the areas of employment law, insurance law, or tax law).
For those who aren’t familiar with it, ERISA regulates employer benefits plans for employees, specifically pension plans and health insurance plans.
Since it was enacted in response to several high-profile poorly funded pension plans, ERISA has been amended several times.
While the amendments – such as 1985’s Consolidated Omnibus Budget Reconciliation Act (COBRA) and 1996’s Health Insurance Portability and Accountability Act (HIPAA) – are sometimes more well-known than the original law itself, ERISA is nonetheless very pervasive in its impacts.
In regards to employer pension plans, ERISA works to ensure that all such plans remain fully funded.
To this end, ERISA regulates several areas in this field.
While it does not compel employers to provide pension plans to their employees, or even set a minimum level of benefits, it does require plans to meet certain funding requirements once they are made available to employees.
More specifically, ERISA sets minimum standards for participation, vesting, benefit accrual and funding.
Additionally, it establishes accountability standards for plan fiduciaries, and gives participants a right to sue to recover benefits and for breaches of fiduciary duty.
For those who currently participate in employer pension plans, the information you regularly receive about your plan is due to ERISA requirements.
Lastly, in the event that a pension fund becomes insolvent or is otherwise terminated, ERISA established the Pension Benefit Guaranty Corporation, a federally-chartered corporation, which guarantees the payment of pension benefits in those circumstances.
As is the case with pension funds, ERISA does not require employers to provide health insurance to its employees nor set minimum coverage levels.
It does regulate the plans once employers choose to offer them, though.
ERISA requirements are also largely the same for health plans as pension plans: it sets minimum standards, creates legal duties for plan fiduciaries, allows a civil cause of action, and has the same requirements on regularly providing information to participants.
As mentioned above, however, the impact of ERISA’s health care amendments is probably better known.
As many are already aware, COBRA allows for a terminated employee to continue health coverage under the employer plan in certain circumstances; the extremely complex HIPAA, among other things, creates protections for medical data privacy and limits the ability of a new employer plan to exclude coverage for preexisting conditions.
Amendments aren’t just a thing of the past, either.
Because ERISA seems to be the favored, if not the only, means to regulate employer-backed health plans, we can almost certainly look forward to more reforms manifesting as ERISA amendments in the future.