ERISA and Healthcare Plan Enforcement
The Employee Retirement Income Security Act (ERISA) was enacted in 1974. It governs how private employers and pension or insurance companies must administer employee benefit plans, including employee healthcare plans.
ERISA governs benefits such as pension plans, health and disability insurance, death benefits, severance plans, plans providing pre-paid legal services, scholarship funds, apprenticeship and training programs, and employer-operated day care centers. ERISA does not cover plans that are required and administered by state laws, such as workers' compensation or unemployment compensation.
Remember that the law does not require an employer to provide its employees with any particular benefits, such as healthcare plans. However, ERISA mandates that once an employer decides to offer such a plan, it must be run in accordance with certain standards designed to protect the interests of employees and other plan beneficiaries (such as family members).
Requirements Under ERISA
ERISA generally provides that benefit plans must be operated in a fair and financially sound manner. Employers and entities that manage and control employment benefit plan funds are required to:
- Manage such funds for the "exclusive benefit" of plan participants and beneficiaries;
- Avoid conflicts of interest when making investment and benefit decisions;
- Report certain information about the plans to the government and to plan participants; and
- Comply with specific guidelines regulating how and where plan funds may be invested.
Each plan must notify participants of the procedure for filing a claim for benefits, and set forth standards that the participants must meet in order to qualify for benefits. Those standards may, for example, include criteria for determining when someone is "disabled" and entitled to disability benefits, how early an employee is entitled to retire and claim pension benefits, how quickly those benefits "vest" in the employee after being paid into the plan, and how quickly a participant may be required to file a claim for health benefits in order for an injury or illness to be covered. An employer or administrator (such as a pension investment or insurance company) may not make significant changes to a plan without notifying the participants in that plan.
Claims for Benefits
A plan administrator may not wrongfully deny a claim for benefits under a plan governed by ERISA. Once a plan participant files a claim, the plan has ninety days to inform the participant whether the claim is accepted or denied. If the claim is denied, the plan must tell the participant how to submit the denial for a full and fair review, and must give the participant sixty days to do so. Once the participant submits a request for review, the plan must review the denial and make a decision within 120 days. If the participant still believes that the denial was wrong, may file suit against the plan under ERISA.