ERISA, also known as The Employee Retirement Income Security Act of 1974, is sometimes as confusing to judges as it is to lawyers. Therefore, it is not surprising that both large and small employers often fail to familiarize themselves with the basic tenets of ERISA before providing health insurance and other "welfare" benefits to their employees.
Generally speaking, an ERISA plan exists when, from the surrounding circumstances, a reasonable person may ascertain the intended benefits, the intended recipients of such benefits, the source of financing for those benefits, and the procedures for receiving said benefits. Essentially, any arrangement where the employer plays some role other than merely collecting or remitting premium payments from employees, or allowing their employees access to such arrangements, may cause that arrangement, however informal, to be governed by ERISA.
Indeed, employers have created ERISA plans without realizing it. In fact, the intent of the employer in providing the benefit to its employees is not really relevant. If the benefit arrangement satisfies the statutory definition of an employee welfare benefit plan, then ERISA applies regardless of the employer's intent or knowledge (or lack thereof).
Unknowingly creating an ERISA plan may expose such employers to a host of ERISA issues. For example, ERISA requires that employers make certain disclosures to employees at specified intervals. For certain written requests made by employees, ERISA imposes up to a $110/day penalty for an employer's untimely disclosures. ERISA also imposes specific obligations on fiduciaries, who can face personal liability for even unintentional violations of those obligations.
ERISA, thus, harkens the old adage that no good deed goes unpunished. In the end, if an employer-sponsored benefit arrangement falls within the statutory definition of an employee welfare benefit plan, then that employer should be ready to comply with ERISA - preferably before litigation or an outside audit commences.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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