What and Who Does ERISA Apply To?
The Employee Retirement Income Security Act (ERISA) was passed in the 1970s to help shore up the nationโs pension system after a series of high-profile implosions.
ERISA sets standards that plan administrators must follow to safeguard pensions and make it less likely that they will go bankrupt.
ERISA has also expanded to cover a variety of employer-offered group benefits, such as health and dental insurance.
As a federal law, ERISA preempts state laws and is often a crucial source of rights for those employees who believe they have been unfairly denied benefits. A typical ERISA case involves someone who was denied a benefit under a group plan and wants to challenge that decision.
If you are unsure whether ERISA applies to you, give us a call. One of our ERISA claims lawyers can meet with you to review your claim with you.
Who Does ERISA Apply To?
Congress intentionally crafted ERISA to apply broad protection to employees in the United States. Therefore, it covers most employees of private companies in the United States. Employers are required to follow ERISA, which includes the following types.
1. Private Companies of All Sizes
Unlike many other federal laws, ERISA does not distinguish between small companies and large ones. Therefore, it applies equally to companies with less than 10 employees and companies with 10,000 employees.
2. All Kinds of Business Entities
Just as it does not distinguish between companies of different sizes, ERISA does not differentiate between different business structures. ERISA applies equally to all forms of businesses, including:
- Limited liability companies (LLCs),
- S Corporations,
- C Corporations,
- General partnerships, and
- Limited liability partnerships
ERISA even applies to sole proprietorships because it defines sole proprietors as โemployees.โ
3. Nonprofit Corporations
Nonprofit corporations, including charities of all kinds, are also governed by ERISA.
In summary, there is a very good chance that ERISA will protect you as long as you work for a private business.
What Does ERISA Cover?
ERISA covers two kinds of plans. The first plan type is โEmployee Pension Benefit Plans.โ The second kind of plan is โEmployee Welfare Benefit Plans.โ Department of Labor regulations define these two terms broadly. Therefore, ERISA typically applies to:
- Retirement funds, whether defined-benefit or
defined-contribution, - Medical and dental insurance,
- Health reimbursement accounts,
- Flexible spending accounts,
- Group accident and sickness plans,
- Severance plans,
- Prepaid legal service plans,
- Housing assistance plans,
- Vacation plans, and
- Business travel insurance plans.
Which Benefits Are Not Covered by ERISA?
Not every benefit is covered. For example, these plans might not fall under ERISA:
- Some voluntary group insurance plans where the employee pays all premiums, and the employer doesnโt select or endorse the plan;
- Some sick pay plans;
- Some short-term disability plans;
- Benefit plans maintained only to comply with the law, such as workersโ compensation; and
- Plans maintained outside the US which benefit mostly non-resident aliens.
Each case is different, and you should have an ERISA attorney carefully review whether your plan falls under ERISA. Your ability to appeal a denial of benefits depends on identifying which law comes into play, and only an experienced attorney can help.
Are There Employers or Plans ERISA Does Not Cover?
You might wonder: Does ERISA apply to public employees? ERISA does not apply to public employees. Government employers, including federal, state, and local entities, are exempt from ERISA regulations.
Public employees are typically covered under separate state or local benefit laws, such as pension and health plans for public sector workers. There are two ways for an employer to be exempt from ERISA. The first way is to fall into a group that is categorically exempt from ERISA. The second is to offer a plan that meets the ERISA safe harbor provision.
1. Specific ERISA-Exempt Groupsย
Two groups are exempt from ERISA: government employers and religious organizations.
Government employers
Congress originally drafted and passed ERISA to prevent the abuse of employee pensions in the private sector. Given that intent, it exempts all government employers. The government employer exemption includes not only federal employers but also state, city, and local government employers. Examples of specific government plans that are exempt from ERISA would include:
- A public school health care plan,
- A fire departmentโs pension fund, and
- A group disability policy for a state National Guard group.ย
Religious organizations
ERISA exempts all โchurch plans,โ which it defines as plans that are โestablished and maintained . . .by a church.โ Despite the sectarian use of the word โchurch,โ ERISAโs use of the word encompasses religious organizations of all faiths.
A few years after Congress first passed ERISA, it expanded the definition of โchurch plansโ to include any church-affiliated organizations. Relevant examples would include organizations like:
- A hospital affiliated with the Roman Catholic Church,ย
- A Jewish school, and
- An Islamic nonprofit organization.
As the Supreme Court recently made clear, it doesn't matter whether the plan was originally started by a religious organization. All that matters is that the plan is currently maintained by a religious organization.ย
2. Safe Harbor Provisionย
Even if ERISA applies to an employer, the employer can provide a plan that ERISA does not cover. However, the plan must meet several requirements:ย
- The employer cannot receive any direct or indirect consideration or compensation for the plan (besides reimbursement for running the plan);
- All of the rights granted under the plan must be enforceable only by the employee or an employee beneficiary;ย
- The employer cannot force or induce employees to participate in the plan; and
- The employerโs involvement in the plan must be minimal.ย
Please be aware, however, that the safe harbor provisions only apply to specific plans. It can never exempt employers from abiding by ERISA.
When Does ERISA Apply?
ERISA applies when a private-sector employer provides employee benefit plans, including pension or welfare benefit plans like health insurance, dental insurance, or disability coverage. It governs businesses of all sizes and structures but does not cover government or religious employers.
Additionally, specific voluntary benefit plans offered by employers, where the employer has minimal involvement, may be exempt under ERISAโs โsafe harborโ provision.
Are There South Carolina-Specific ERISA Regulations?
ERISA applies broadly to employers in South Carolina, covering private employers who provide their employees with pension and welfare benefit plans. Private-sector employers must ensure that they comply with ERISAโs regulations concerning the administration of employee benefit plans, including fiduciary responsibilities, funding, and reporting.
For example, a small tech company in Columbia, South Carolina, with just five employees offering a 401(k) plan, must follow ERISA regulations. A Greenville-based nonprofit with a pension or health benefit plan is subject to ERISA unless it falls under the religious exemption.
In South Carolina, employers providing group health plans, flexible spending accounts, or even vacation plans are covered by ERISA.
When Does ERISA Apply in South Carolina: Some Practical Examples
Example 1
A Columbia-based manufacturing company offers a 401(k) retirement plan and health insurance to its 100 employees. Under ERISA, the company must provide specific disclosures about the benefits, follow fiduciary standards in managing the plan assets, and ensure that plan participants can appeal if their benefits are denied. Employees can bring an ERISA claim to enforce their rights if the employer fails to follow these regulations.
Example 2
A small Greenville tech startup offers a group health insurance plan but chooses to provide an additional voluntary vision plan fully paid for by employees. Because the vision plan is voluntary, with no employer contributions and no coercion to participate, this plan could fall under ERISAโs safe harbor exemption.
Example 3
A small real estate agency in Charleston offers its employees a voluntary group life insurance plan through a third-party provider. The employees pay 100% of the premiums, and the employerโs only role is to distribute enrollment forms without endorsing the plan or contributing to it.
Because the employer does not make any contributions or influence participation, this voluntary insurance plan would fall under ERISA's โsafe harborโ exemption, meaning it is not subject to ERISA regulations.
Understanding Exemptions and Appeals
The exemptions explained above are the most common in South Carolina. When disputes arise, particularly around benefit denials, employees can appeal under ERISA, but only if the plan is covered.
Under ERISA, South Carolina employees denied benefits from a covered plan must follow a specific appeals process:ย
- The employee must submit an internal appeal to the plan administrator, typically within 180 days of the denial;ย
- The plan has 60 days (sometimes 120) to review and respond; andย
- If the denial is upheld, the employee can file a lawsuit in federal court.ย
It's important to note the courtโs review is limited to the evidence provided during the internal appeal, so itโs crucial to include all relevant documentation at that stage.
Understanding ERISAโs scope and consulting an ERISA attorney early in the process can improve your chances of success. This ensures you can effectively enforce your rights, whether challenging a denied health claim or seeking clarity on your pension benefits.
Questions About What Does ERISA Apply To? Contact Our Firm
Knowing who is subject to ERISA is critical for understanding whether you have rights under ERISA. That said, it is vital that you get legal help if you have been denied a benefit or if you suspect that a plan administrator is not managing your plan properly. An ERISA claim is complicated, with confusing deadlines, so the assistance of a seasoned ERISA lawyer is essential.
Contact Peace Law Firm today for a free consultation or give us a call. Our ERISA lawyer will be happy to meet with you to go over your claim with you.
Resources:FAQs about Retirement Plans and ERISA. US DOL, link