ERISA – Frequently Asked Questions
- What is ERISA?
- How long has ERISA been around?
- Does ERISA apply to disability insurance I have through work?
- What types of employee benefits does ERISA cover?
- What is an ERISA Plan?
- What is the ERISA Plan Document?
- What is the ERISA Summary Plan Description?
- Does my employer have to offer disability and health insurance to employees?
- Does the law require my employer to cover certain disabilities under its ERISA Disability Benefit Plan?
ERISA stands for the Employee Retirement Income Security Act, a federal law passed by Congress and signed into law by Gerald Ford in 1974. In the 1960’s, President John Kennedy began a study commission to reform the pension system in the United States after some large corporate bankruptcies caused pension plans to fail and leave retirees without any pensions. After a decade of study, ERISA was passed to protect pension plans.
During the process of creating ERISA, other fringe benefits were added to ERISA’s coverage by Congress. What are now called “welfare benefit plans” include the many different types of insurance plans in which employees participate through work. These include disability insurance, health insurance, life insurance and long term care insurance. Other fringe benefits, like on-site day care, pre-paid legal plans, and other benefits, are included too.
The idea behind ERISA was to create one law that would regulate benefit plans of all types offered by private employers in the United States. Under the commerce clause of the U.S. Constitution, Congress has the power to regular interstate commerce. In one stroke of pen in 1974, Ford took insurance plans previously regulated by states and made them a federal matter. While some state laws that regulate insurance still apply, the general scheme for making claims and appealing claims is subject to federal law and the regulations of the U.S. Department of Labor.
ERISA only applies to private employer pension and welfare benefit plans. It does not apply to plans offered to employees of government or church entities. Anyone that participates in a benefit plan through a private employer, even if the company only has one employee, has benefits under a plan subject to ERISA.
ERISA was passed by Congress and signed into law by President Ford in 1974.
If you work for a private company, yes. ERISA applies to any type of employee benefit that is sponsored by a private employer. If you work for a governmental entity or a church, no, ERISA does not apply to your disability insurance.
ERISA applies to fringe benefits you have through a private employer. It does not apply if you work for a governmental entity or a church. The following types of employee benefits offered by employers are examples of benefit plans covered by ERISA:
- Disability insurance
- Health insurance
- Life insurance
- Accidental death & dismemberment (AD&D) insurance
- Long term care insurance
- Pension plans
- 401(k) plans
- Pre-paid legal services plans
- Short term disability
- Long term disability
Plan is the term used in the ERISA law to describe group benefit programs offered through a private employer or a union. There is an ERISA Plan for any type of fringe benefit you can get through your employer.
Every employer or union that sets up a benefit plan is supposed to create a set of rules to the Plan. ERISA, the set of federal laws that regulates employee benefits, requires the sponsor of the plan to create a plan document which lays out those rules.
Employers or unions that offer ERISA Plans have to have a Plan Document that spells out the rules of the Plan. However, the law does not require that they give you a copy of that document. Instead, they have to give you a summary of the important terms of that document. You can ask for the Summary Plan Description (abbreviated as “SPD”), and the administrator of the ERISA Plan has 30 days to give you a copy of the SPD. We recommend that you ask for both the Plan Document and the Summary Plan Description to make sure you know all of the rules that apply to your Plan.
No. A private employer does not have to offer any type of employee benefits. If they choose to offer disability insurance, health insurance or any other type of benefits plan, they become covered by the Employee Retirement Income Security Act, a 1974 law that regulates employee benefits. This was confirmed by the Supreme Court in a 1995 case, where the court stated, “We are mindful that ERISA does not create any substantive entitlement to employer provided health benefits or any other kind of welfare benefits. Employers or other plan sponsors are generally free under ERISA, for any reason at any time, to adopt, modify, or terminate welfare plans.” Curtiss-Wright Corp. v. Schoonejongen, 514 U.S. 73 (1995).
Does the law require my employer to cover certain disabilities under its ERISA Disability Benefit Plan?
No. In fact, the law allows your employer to have a disability plan that excludes any disability they want to exclude. A plan can also impose very strict (and seemingly unreasonable) criteria if they wish. For example, if an employer wanted to go to the trouble of writing a plan that says it only covers back injuries that happen on a Tuesday, that would be allowed under ERISA, the federal law that governs employee benefit plans.