What Does ERISA Apply To?
The Employee Retirement Income Security Act (ERISA) was passed in the 1970s to help shore up the nation’s pension system after a series of high-profile implosions.
ERISA sets standards that plan administrators must follow that safeguard the 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 who wants to challenge that decision.
If you are unsure about whether ERISA applies to you, give us a call. One of our ERISA claims lawyers can meet with you to review your claim.
Who Does ERISA Apply To?
ERISA actually covers most employees of private companies in the United States, including:
- Small companies, even those with only 1 or 2 employees.
- Nonprofit corporations. Charities and nonprofits are covered by ERISA.
- Limited liability corporations, S corporations, C corporations, and partnerships. It doesn’t matter how you have structured your business, it is probably covered by ERISA.
There is a very good chance you are protected by ERISA so long as you work for a private business.
Are There Employers Not Covered?
Yes. If you work for the following, you probably are not protected by ERISA:
- Government employers are not subject to this legislation. If you work for the state of South Carolina or a municipality, then you are not afforded ERISA protection.
- Churches are typically not covered by ERISA.
What Does ERISA Cover?
ERISA covers two kinds of plans. The first plan type is “Employee Pension Benefit Plans.” The second kind of plan is “Employee Welfare Benefit Plans.” 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
- 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 doesn’t 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 workers’ compensation
- 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.
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 required to follow ERISA include 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 that have 10 employees and companies that have 10,000 employees.
#2 - All Kinds of Business Entities
Just as it does not distinguish between companies of different sizes, ERISA does not distinguish 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
In fact, ERISA even applies to sole proprietorships because it defines sole proprietors as “employees.”
#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 protects you so long as you work for a private business.
Are There Employers or Plans ERISA Does Not Cover?
Despite the wide applicability of ERISA, it does not cover all employers. In fact, 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 Groups
Two groups are exempt from ERISA: government employers and religious organizations.
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 department’s pension fund, and
- A group disability policy for a state National Guard group.
ERISA exempts all “church plans,” which it defines as plans that are “established and maintained . . .by a church.” Despite the sectarian use of the word “church,” ERISA’s use of the word encompasses religious organizations of all faiths. A few years after Congress first passed ERISA, it expanded the definition of “church plans” to include any church-affiliated organizations. Relevant examples would include organizations like:
- A hospital affiliated with the Roman Catholic Church,
- 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.
#2 Safe Harbor Provision
Even if ERISA applies to an employer, the employer can provide a plan that is not covered by ERISA. However, the plan must meet several requirements:
- 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,
- The employer cannot force or induce employees to participate in the plan, and
- The employer’s involvement in the plan must be minimal.
Please be aware, however, that the safe harbor provisions only apply to specific plans. It can never exempt employers from abiding by ERISA.
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.