What are common employer ERISA violations?
Employers who offer voluntary retirement and welfare plans to their employees should do so within the regulations stipulated by ERISA. Failure to adhere to the minimum requirements set by the federal law may attract civil or criminal action against the employer.
What Is ERISA?
ERISA stands for Employee Retirement Income Security Act, a federal law enacted in 1974 to protect the rights of employees of private organizations offering qualifying retirement, health, and profit-sharing plans. Essentially, the act regulates only for-profit organizations, meaning government agencies and churches do not fall under ERISA laws.
The law requires employers to:
- Disclose plan information to participants, such as plan features, funding, etc.
- Set minimum participation standards
- Provide fiduciary duties
- Establish a process for reporting grievances
- Allow employees to sue for violations without victimizing them, among other things.
Generally, ERISA should protect the retirement savings of private-sector employees from mismanagement by promoting transparency and accountability.
The federal government enforces these laws through three bodies, namely:
- Employee Benefits Security Administration (EBSA)
- Internal Revenue Service (IRS)
- Pension Benefit Guaranty Corporation
Like any other act, ERISA laws are continually changing, and companies should remain compliant by revising their plan documents and communicating the changes to the participants.
Likewise, employees should stay abreast of the ERISA laws. Being informed about your rights makes it easier to know when the employer violates them.
Common ERISA Violations
Common ERISA violations may be intentional or unintentional and could occur at different stages–while implementing startup procedures or failing to keep up with ongoing requirements. Some common violations include:
Failing to Disclose Information
ERISA requires companies to disclose important information to participants, both long-term plan changes and temporary changes such as reduced funding. The law sets the timeframes within which the notification should be made.
Denying Benefits to an Employee
Employers running qualifying plans should provide benefits to their employees as they lay them out. If an employer denies a qualifying employee benefit, the action amounts to ERISA violation.
Breaching Fiduciary Duty
A plan administrator must discharge their fiduciary duties in a way that promotes the interests of the participants and beneficiaries. Failing to follow the set fiduciary guidelines is a punishable violation.
Retaliating Against an Employee
ERISA allows you to initiate legal action against an employer for violating your rights. Effectively, the law prohibits the employer from retaliating against such an action, e.g., firing or discriminating against you.
Penalties for Violating ERISA Laws
ERISA violations can attract civil or criminal charges depending on the nature and extent of the breach. If your employer infringes on your rights, you can file a complaint against them. However, before filing a lawsuit, you should seek an administrative appeal first.
Civil Penalties
Under civil action, the court may award you:
- Unpaid contributions
- Interest on unpaid contributions
- Attorney’s fees
In addition, the court may levy a fine as they deem fit.
Criminal Penalties
Criminal penalties may apply if the violation is criminal, such as fraudulent manipulation of information to deny benefits.
These penalties may include:
- Imprisonment – Up to 10 years
- Fine – Up to $100,000 (for individuals) and $500,000 for companies
If your employer violated your ERISA rights and you don’t know how to secure your rightful benefits, a lawyer can guide you. Most attorneys offer free consultations, so you can get a no-obligation case evaluation and learn your options.