8 Things to Know About ERISA Violations
Please Note: The Peace Law Firm is licensed to practice only in North Carolina and South Carolina.
Youโve worked hard to earn your benefits, but now, when you need them most, suddenly youโre being told you canโt access them. Your company or its benefits provider is probably trying to tell you itโs your fault. You feel confused and overwhelmed by all the jargon. You may feel like giving up. Donโt. Let us help.
Here at The Peace Law Firm, weโve been standing up for the hard working people of South Carolina for 20 years. We know the federal law that protects employee benefits, and we apply it to get you justice.
ERISA is a federal law that provides certain minimum standards for benefit plans provided by private employers.
These standards include certain rights employees have against their employers.
If you are a member of a group benefits plan, it is important to understand what ERISA is, common ERISA violations, and what your rights are under this law.
In this article, weโre going to explain it all.
If you think your ERISA rights have been violated, please call (864) 298-0500 or reach us online for a free consultation. Our experienced ERISA attorneys can explain your options.
What Is ERISA?
ERISA stands for the Employee Retirement Income Security Act of 1974. ERISA entitles employees to certain rights concerning disability, retirement, and other group benefit plans.
Several government agencies enforce ERISA. The Employee Benefits Security Administration (EBSA) is responsible for enforcing the reporting and disclosure provisions of the Act, while the U.S. Department of Labor, Internal Revenue Service, and Pension Benefit Guaranty Corporation enforce other provisions of the Act.
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Employer Obligations Under ERISA
An employer has three main duties under ERISA.
First, whoever manages the assets of the plan must uphold their fiduciary duties to the planโs participants.
Second, an employer must provide participants with information on the features of their plan and how itโs financed.
And third, employers must have procedures in place for employees to file grievances and appeals. ERISA violations usually involve a breach of one of these obligations.
Penalties for ERISA Violations
An employer that violates ERISA may be subject to civil or criminal penalties.
The specific amount will vary on a case-by-case basis, but in general, the civil penalties and fines range from a few hundred to a few thousand dollars per day depending on the type of ERISA violation. Criminal penalties are much larger and may include jail time.
Common ERISA Violations and Examples
Here are the eight most common ERISA violations. Examples are included to help you better understand how they make look in real life.
1. Denial of Benefits to Current or Former Employees
ERISA requires employers to provide benefits to employees according to the terms of the group plan. An employer violates ERISA if it withholds benefits or provides fewer benefits than an employee is owed.
Example
After retiring from 25 years of service, James applied for his pension benefits as outlined in his company's retirement plan. Despite meeting all eligibility criteria, his former employer denied the claim, stating vague administrative issues. James later discovered that the company had arbitrarily classified certain years of his service as ineligible, without justification. This denial of rightful benefits is a clear ERISA violation.
2. Reduction of Promised Benefits
Once a plan is in place, ERISA requires an employer to maintain and fulfill the terms of that plan. As a result, employers must ensure the plan is funded and cannot reduce the benefits originally promised.
Example
Maria had been contributing to her employerโs pension plan for over a decade. The plan promised a fixed monthly retirement payout. However, shortly before her retirement, the company unilaterally changed the formula, significantly reducing her projected monthly payments. Maria was not consulted or notified in advance. This unauthorized reduction violated ERISA, which prohibits cutting promised benefits once vested.
3. Retaliation Against an Employee
Section 510 of ERISA prohibits employers from retaliating against any employee for enforcing their rights under a benefit plan. Firing, fining, suspending, or discriminating against an employee because they seek to enforce their rights are all ERISA violations.
Example
When Alan noticed that his employer was miscalculating contributions to the 401(k) plan, he raised the issue with HR and later filed a formal complaint. Two weeks later, he was demoted and received a negative performance review for the first time in five years. These sudden actions were directly tied to his protected activity, making this a retaliatory act under ERISA Section 510.
4. Early Stoppage of Health Care Coverage
The Consolidated Omnibus Budget Reconciliation Act (COBRA) amended ERISA to provide additional health care coverage even after an employee loses their health benefits. Under COBRA, employees may be eligible to continue receiving group health benefits for a limited period of time. If an employer refuses to provide this coverage to an eligible employee, it is an ERISA violation.
Example
Jennifer was laid off after five years at her company and immediately inquired about COBRA coverage. Although she was eligible, the HR department told her the company โdidnโt do COBRA anymoreโ and denied her the option to continue coverage. Weeks later, she was left without insurance for a needed surgery. The employerโs refusal to offer COBRA continuation violated ERISA.
5. Health Plan Coverage for Mental Health
Although group benefit plans are not required to provide benefits related to mental health and substance abuse, many do. Because of an amendment to ERISA, employers offering these plans may not impose extra costs or treatment limits on those benefits compared to other health coverage.
Example
David's employer-sponsored health plan covered both physical and mental health services. However, when he sought inpatient treatment for depression, he was denied coverage due to a five-day limit on mental health stays, while physical rehab was covered for up to 30 days. This disparity in treatment limits violated ERISAโs parity requirements for mental health benefits.
6. Failing to Provide Required Notices
Section 101 of ERISA requires plan administrators to provide notice to plan participants for a number of events related to the plan. These include funding-based limitations on distribution and information about โblackout periodsโ when plan participants are temporarily unable to obtain distributions from their plan.
The EBSA also requires employers to provide a โsummary of material modificationsโ to plan participants. This summary contains information about major changes to the plan and must be sent to plan participants within 210 days after the end of the plan year when the changes were made.
Example
Sophiaโs employer implemented a major change to the companyโs 401(k) plan, including suspending matching contributions. However, no notice of this change was provided. Months later, Sophia discovered that her paycheck deductions were being invested without the match she expected. The employer failed to issue a summary of material modifications, violating ERISAโs notice requirements.
7. Breach of Fiduciary Duties
Under ERISA, anyone who exercises discretionary authority over plan assets or plan management has a fiduciary duty toward the planโs participants. As a result, fiduciaries must run the plan solely for the benefit of its participants, and failure to do so is an ERISA violation.
Example
The CFO of a mid-sized firm, who managed the companyโs retirement plan, decided to invest a large portion of plan assets into a struggling business owned by his brother-in-law. The investment quickly tanked, causing substantial losses. Since the decision was not in the best interest of plan participants and was a clear conflict of interest, this constituted a breach of fiduciary duty under ERISA.
8. Failing to Follow the Plan
ERISA exists to protect the participants involuntarily with established retirement and health plans. Whether youโre a current or former employee, your employer may try to withhold or change the benefits it owes you. In addition to the other violations in this list, any other failure by an employer to follow through on the promises made in a plan may be an ERISA violation.
Example
Rachel was promised maternity leave coverage under her employerโs short-term disability plan, which was clearly outlined in the benefits booklet. When she filed her claim, the HR manager claimed that the benefit was โunder reviewโ and refused to approve the claim. Since the plan had not been officially amended or discontinued, the failure to follow through violated ERISA.
If these ERISA violations examples reflect what youโre experiencing right now, The Peace Law Firm is here to help you seek justice.
How Can I Challenge ERISA Violations?
There are three steps in pursuing a claim for an ERISA violation:
- Internal claim,
- Administrative appeal, and
- Lawsuit.
The Peace Law Firm can help you with each step.
Section 502 of the Act grants plan participants and beneficiaries the power to bring a civil action to recover benefits and enforce their rights provided by the plan. Before you can file a lawsuit, however, you must file an administrative appeal. Unfortunately, the ERISA appeals process is complex and involves working directly with the insurance company.
If you have had an ERISA claim denied, itโs important to speak with an ERISA lawyer as soon as possible. Depending on the nature of the claim, you may have a limited time to file an appeal. An ERISA attorney can help you through this process and make sure you protect your rights and recover the benefits and attorney fees you are owed.
What Compensation Is Available?
If your ERISA claim is successful, you can receive payment for the previously denied benefits. You can also get the denied benefits reinstated moving forward. Your attorney fees may also be covered.
Have Your Group Benefits Been Denied?
The Peace Law Firm provides experienced representation in ERISA claims cases. We can help determine the validity of your claim and advise you of what steps you can take if your benefits are denied. Contact the Peace Law Firm online or call (864) 298-0500 today for a free consultation.
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