Best Practices: Avoiding ERISA Pitfalls

The Employee Retirement Income Security Act (ERISA) is one of the more complicated segments of employment law. Absent specific training and authorization HR personnel should never attempt to provide any advice regarding employee benefits. Incorrect statements often result in the employer being sued for misrepresentations or for a breach of fiduciary duty in costly litigation.

Start with the summary plan description ("SPD"). ERISA requires these to be understandable by your employees. Do you understand the benefits offered, how an employee become eligible for them and what will be received when an employee is eligible?

Timely provide employees with a copy of the SPD. ERISA requires employees to be given the SPD within 90 days of hiring. When changes are made, the employees must be timely informed. Where there is a collective bargaining agreement, the SPD and the collective bargaining agreement must be available for inspection by any participant. If employees have questions about benefits, the SPD will always be the starting point.

Don't delay - promptly transmit all written requests for copies of the Plan. ERISA requires plan administrators to provide certain information within 30 days of any written request.

Don't make promises about future plan benefits until they're set in stone. Employers who make promises about benefits will be held to those promises.

Get out ahead of the curve: provide as much advance notice as possible about early retirement programs. An employer considering an early retirement program should issue written statements to employees contemplating retirement that something may be coming. Employers may not make misleading statements about whether an early retirement program will be offered.

Ensure COBRA notices are Timely Sent to All Qualified Participants. COBRA notices must be sent out in a timely fashion to all qualified participants. Know whether the health insurer will administer COBRA benefits. Many do not without charging the employer for it. Notices must be sent to all qualified beneficiaries.

Know the ERISA Golden Rule: an employer who makes any statement about future benefits, whether in response to questions or on the employer's own initiative, will be held liable for any inaccurate information:
(a) when the statement is materially misleading when made or
(b) when the statement is true when made but turns out to be inaccurate because of later decisions and the employer fails to timely provide participants with the correct information.

Fortunately, many mistakes of this nature can be corrected if an employer acts quickly. If an employer becomes aware that it made an incorrect statement, it should "correct" the inaccurate information as soon as possible, determine whether any participant or beneficiary has been harmed and the appropriate action to take.

If you have questions about avoiding ERISA pitfalls, call Kramer Rayson LLP at 865-525-5134 or contact us online. With offices in Knoxville and Oak Ridge, we regularly serve clients throughout the state and beyond.