Employee Retirement Income Security Act (ERISA)

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Updated: 4/11/2007 11:26 am
The Employment Retirement Income Security Act, also known as ERISA, was enacted by Congress to set uniform standards for the administering of employee benefit plans by private employers and insurance companies. This federal law doesn't require an employer to provide its employees with any particular benefits. Instead, it requires that once an employer decides to offer a benefit plan, it must follow certain standards designed to protect the interests of employees and other plan beneficiaries, such as family members. These standards mainly provide that benefit plans must be operated in a fair and financially sound manner. ERISA covers a wide range of benefits from pension plans and disability insurance to scholarship funds and training programs. ERISA, however, doesn't cover plans that are required and administered by state laws, such as workers' compensation or unemployment compensation. Generally, your health plan is covered by ERISA if you purchased it through your work. However, you're not covered if your employer is a government agency, if you're self-employed, or if you work for any kind of religious organization. Furthermore, if you bought your plan personally, outside of work, ERISA usually doesn't apply. The paperwork involving your benefits should indicate whether or not it's an ERISA program. It's important that you determine if your benefits are covered by ERISA as employers participating in the program have an obligation to provide promised benefits and satisfy ERISA's requirements for managing and administering private pension and welfare plans. For example, if you're a 55-year-old new employee and your plan requires you to retire at age 60, ERISA can give you until age 65 to retire. The U.S. Department's Pension and Welfare Benefits Administration, together with the Internal Revenue Service, are in charge of enforcing the laws under this act to ensure that workers receive their promised benefits. Keep in mind, however, that ERISA-covered plans are exempted from state laws and regulations. This means that if you file a claim to recover unpaid benefits owed to you, you must do so in federal courts and your damages will generally be limited only to the amount of the unpaid benefits. You won't be able to recover anything more, even if you've lost your house, your credit, or had to file for bankruptcy because your claims were not paid. As a result, unless your claim involves a large amount of money, it may not be economically feasible to file a lawsuit over the denial of a claim.
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