Are Punitive Damages Available Under ERISA?

are punitive damages available under ERISA

Congress instituted the Employee Retirement Income Security Act of 1974 (ERISA) to protect the value of employee benefit programs. ERISA provides plan administrators with a standard of conduct they must follow when handling plan funds, reporting information to the government, and notifying participants of the plan’s terms and status.

ERISA enables a federal pathway for members to enforce their rights through fines, sanctions, and lawsuits in federal court. The law allows a private right of action for a plan participant to recover for wrongly denied benefits or ERISA violations. Because the plan administrator violated the law, you may wonder, does ERISA allow punitive damages?

What Are Punitive Damages?

In South Carolina, courts can award punitive damages when a defendant’s conduct was willful, wanton, or reckless (see Section 15-32-520). Punitive damages are a type of monetary compensation distinct from compensatory damages.

The additional damages are intended to punish the defendant and deter others from engaging in similar behavior. To receive punitive damages in your case, you must request them in your initial complaint.

Punitive Damages and ERISA State Law Preemption

South Carolina law allows for punitive damages in many cases. However, ERISA is a federal law that does not allow punitive damages. The conflict between ERISA and South Carolina law is settled by a legal concept known as “preemption.” ERISA preempts (overrides) state law as a federal law unless the applicable state law regulates insurance.

South Carolina’s statute allowing punitive damages does not seek to regulate the insurance industry. Thus, ERISA will preempt the South Carolina rule, and a court will not grant punitive damages in an ERISA case.

Instead, ERISA authorizes courts to grant “appropriate equitable relief.” An ERISA lawsuit may result in the participant receiving the total amount of the plan’s benefit. The court may also order the plan administrator to return mishandled plan funds. 

What About ERISA Violations, Fines, and Sanctions?

While ERISA does not allow punitive damages, it does provide a way to punish plan administrators that misbehave. When you file a complaint against a plan administrator, the Employee Benefits Security Administration (EBSA) is responsible for investigating your claim.

EBSA may issue fines, require payments to plan participants, and enforce changes to the company's practices and procedures. In addition, as part of your lawsuit for improper denial of benefits, you may request that the judge issue these penalties.

How Can an ERISA Attorney Assist with My ERISA Claim?

The answer to the question, Are punitive damages available under ERISA? depends on whether ERISA covers your plan. It’s difficult to know whether ERISA applies because ERISA doctrine depends on extensive federal case law.

An experienced ERISA attorney can help you determine if ERISA applies. They’ll also explain your rights as a plan participant and how you can enforce the plan’s terms. While ERISA does not allow punitive damages, you have several routes for punishing ERISA violations, including fines and non-monetary penalties.

When you call the Peace Law Firm, you’ll connect with an attorney who has helped many injured people protect their benefit plan. Contact us today for your free consultation.

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