What Types of Benefit Plans Does ERISA Cover?

The Employee Retirement Income Act of 1974 (ERISA) covers a wide range of plan types, which fall into two main categories—Retirement and Health & Welfare. As outlined on our Legal Services pages, here and here, ERISA covers plans, offered through an employer, that provide benefits such as retirement payments, health insurance, disability coverage, or severance pay. ERISA carves out certain employers—such as governmental units or church employers—and it does not cover benefits under programs such as Social Security. Fair Work attorneys have extensive experience litigating and counseling under a wide variety of ERISA plans:

Retirement Plans

401(k) and 403(b) Retirement Plans

These “defined contribution” plans are now the most common plans for retirement saving through employers. Participants (current or former employees) can earmark part of their wages to a plan, and the employer often matches this contribution at a set level. Workers aren’t promised a specific benefit at retirement; instead, their retirement is funded by the balance in their account (contributions + investment performance – fees). Fair Work attorneys have litigated cases involving many aspects of these plans. For example, ERISA mandates that plan “fiduciaries,” who are responsible for administering the plan, ensure that investments and fees are reasonable. As the Department of Labor has pointed out, even small differences in performance or fees (e.g., paying 2.5% of your account instead of 1.5%) can add up over the years, resulting in a dramatically smaller amount available at retirement. You may also be able to recover if you purchased overvalued stock of the employer itself.

Myth: If you’re able to choose where your retirement funds are invested, you’re on your own if you lose your money.

Fact: ERISA imposes duties of prudence and loyalty on fiduciaries. These duties limit the types of investments they can make available to plan participants (workers saving for retirement), even if the participant ultimately makes the choice about where her or his money is invested. Fiduciaries may be held responsible if they limit participants’ options to funds that are too risky and/or too expensive. They also have to ensure that participants’ options are diversified and they are forbidden from engaging in self-dealing.

Defined Benefit Pensions

When people think of pensions, they often think of plans that offer a set benefit at retirement (e.g., $ X per month after 30 years of work). ERISA imposes specific duties on fiduciaries of defined benefit plans to enforce that promise. Fiduciaries cannot mismanage plan assets and put plan benefits at risk. Participants can’t have benefits reduced after those benefits have “vested,” or become irrevocable.

Union-Sponsored Plans

Some plans are set up through Union-Employer agreements, including plans where many employers whose workers are covered by the same union contribute to the plan. These plans raise several unique issues, like recovering contributions from delinquent employers, recovering “withdrawal liability” or makeup payments from employers who have left the plan, and resolving disputes among union- and employer-sponsored trustees.

Employee Stock Ownership Plans (ESOPs)

ESOPs are plans that primarily invest in the stock of the sponsoring company. Issues come up when the company’s owners cause the ESOP to pay too much for the company, engage in “prohibited transactions” (self-dealing that ERISA prohibits), or otherwise fail to act in the best interest of participants.

Health & Welfare Plans

Healthcare Plans

Employer-sponsored plans that provide coverage for employees and their families raise a range of issues, which evolve as the legal landscape changes. Fair Work attorneys have handled a range of matters, such as disputes where plans systematically refuse to cover certain conditions, fees charged by providers to plans, and compliance with the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and other regulations. In addition to detailed regulations, such as those providing for the procedure by which participants must be allowed to appeal denials of coverage, ERISA’s prudence and loyalty standards apply to health plans as well. Relying on experienced ERISA attorneys is crucial given the complexity of both ERISA law and the healthcare field in general.

Myth: Healthcare coverage in the U.S. is always expensive and confusing; that’s just the system we have.

Fact: We’ve all heard horror stories about people dealing with their health insurers and providers, and navigating the healthcare system can be frustrating even in the best circumstances, but this doesn’t mean you’re without a remedy if your plan’s administrators are violating the law. For example, if they deny coverage for services (like mental health care) or overpay for certain medications, leaving less money available for other care, ERISA may provide you a remedy.

Long- and Short-Term Disability Plans

Certain plans cover you if you are unable to work due to a disability. (Note that ERISA does not cover plans set up to comply with state workers compensation requirements.) As with health plans, ERISA imposes a range of regulations on these plans, and Fair Work attorneys have experience with the legal landscape applying to such plans.