A top concern of most workers is whether or not they’ll have enough money to retire. When workers invest their income in retirement plans, they want to know that those funds will be safe for the future and be easily accessible when needed. Luckily, the Employment Retirement Investment Security Act (ERISA), protects the interests of employee benefit plan participants and their beneficiaries. The legislation provides pension or insurance companies with guidelines on how to administer employee benefit plans, including disability and health plans.
History of ERISA
ERISA was originally intended to address problems with corporate pension plans. Prior to 1974, the U.S. Department of Labor regulated employee benefit plans through the Welfare and Pension Plans Disclosure Act of 1959. The WPPDA required that employers and labor unions provide pension plan financial reports and descriptions to the federal government. It was intended to increase transparency and require plan sponsors to provide plan participants and beneficiaries with more information about the financial health of their benefit plans.
Unfortunately, the WPPDA was too limited in scope. Although it was intended to keep benefit plans financially healthy, some highly publicized bankruptcies, like that of the Studebaker Motor Company in 1966, left employees with no pensions and no remedies. In the 1950s and 60s, Studebaker increased the benefits it promised to employees four times. Unfortunately, the company had no hope of funding these future contributions and employees were sandbagged when Studebaker went out of business.
In response to heartbreaking situations that left employees with no retirement savings, Congress passed ERISA to replace the WPPDA in 1974. Although ERISA mainly deals with employee retirement plans, the legislation also applies to employee-provided insurance plans, including health and disability insurance.
It’s important to remember that ERISA only applies to private employers with more than 20 employees. It does not protect benefit plans offered by the federal or state government, nor does it apply to benefits plans churches provide to their employees. ERISA also does not apply to state benefit plans like workers compensation and unemployment insurance.
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How Does ERISA Protect Employees?
ERISA protects the retirement assets of American workers by implementing rules that qualified retirement plans must follow to ensure that plan fiduciaries use plan assets appropriately. Under ERISA, plan sponsors must regularly provide their participants and beneficiaries with information about plan features and funding. Plans must provide this information free of charge.
ERISA added to the protections of the WPPDA by developing standards of fiduciary duty. These fiduciary duties require that the plan administrators act solely in the interests of plan participants and their beneficiaries; carry out their duties prudently; diversify investments; and pay only reasonable plan expenses. Fiduciaries who don’t follow the basic standards of conduct may be personally liable to restore any losses to the plan, or restore any profits through improper use of the plan’s assets, resulting from their actions. This provides employees with security against abuses in management of their funds.
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ERISA and Disability Insurance Plans
ERISA also applies to short and long-term disability insurance coverage provided by employers. The legislation regulates disability plans, including information provided to employees, how disability benefit claims are processed, the timeline for processing a claim, and the individual’s rights if their benefits are denied.
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Disability Plan Information
ERISA requires employers to provide employees with information about their disability plan benefits, including a detailed explanation of what is and what is not covered under the plan; directions on how to file a claim; and an outline of the appeal process if a claim is denied.
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Processing Disability Claims
When an employee files a disability claim, ERISA sets time limits for the insurance provider to decide the claim. Generally, an insurance provider must approve or deny the claim within 45 days of filing, although the provider may extend this by 30 days if they notify the employee. If a claim is denied, the provider must explain why in writing. ERISA provides the time limits for an employee to appeal a claim and another deadline for the provider to decide the initial appeal.
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Rights Upon Denial of a Claim
If the provider denies a disability claim, the employee has the right to appeal. If the provider denies the appeal, the employee may then file an ERISA lawsuit in federal court. This is essentially an administrative hearing where a federal judge will decide the case based upon the record established during the claims and appeal process.
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Important ERISA Amendments
Congress amended ERISA in some important ways over the years. The Consolidated Omnibus Budget Reconciliation Act amended ERISA in 1985; the Health Insurance Portability and Accountability Act added to the legislation in 1996; and Congress also implemented the Newborns’ and Mothers’ Health Protection Act in 1996.
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COBRA
The Consolidated Omnibus Budget Reconciliation Act gives workers and their families who lose their health benefits the right to continue with their group health plan for a limited period of time after a voluntary or involuntary job loss, reduction in hours worked, transition between jobs, death, divorce, and other life events. Generally, all group plans for employers with 20 or more employees are subject to ERISA and required to offer COBRA continuation coverage.
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HIPAA
The Health Insurance Portability and Accountability Act required the Secretary of the U.S. Department of Health and Human Services to develop regulations to protect the security and privacy of certain health information. The Privacy Rule established nationwide standards for the protection of certain health information, while the Security Rule established a national set of security standards for protecting certain health information that is held or transferred in electronic form.
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Newborns’ Act
The Newborns’ and Mothers’ Health Protection Act added important protections to newborns and their mothers with regard to the length of a hospital stay after birth. The Newborn Act requires that all plans offering maternity coverage pay for at least a 48-hour stay after routine childbirth, or 96 hours for C-section births. Employees can also enroll themselves, their spouse, and their newborn in an employer-provided health plan within 30 days of a birth or adoption, regardless of when the open enrollment season might be.
To find out if you believe you’ve been wrongly denied disability benefits under ERISA, please call our toll-free number 844.UNDERWOOD (844.863.3796) or send us an email to arrange your free consultation with our lawyers. Se habla español.
Our seasoned ERISA Lawyers at the Underwood Law Office in McKinney, Texas serve all of Dallas and Fort Worth, including Plano, Frisco, Allen and McKinney. Our seasoned ERISA Attorneys at the Underwood Law Firm in Huntington, West Virginia serve all of West Virginia.
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