Frequently Asked Questions
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Does an employer have any legal duties regarding an employee pension plan?
Yes. A federal law known as the Employee Retirement Income Security Act of 1974, which is commonly referred to by the acronym of ERISA, establishes the duties of employers who control or administer their employees' pension plans.
ERISA establishes the minimum standards for the organization and administration of pension plans and for the investment of planned assets. Employers are not required to offer any certain level of benefits to their employees. The documents which organized and established the plan also established what the employer's duties are. Therefore, the planned documents themselves should be reviewed and you should insist on seeing a copy of the planned document itself. Your employer is required to make a copy available for your review and to provide you with a summary of the plan, often referred to as a "summary plan description" or "SPD."
What pension plans does ERISA cover?
ERISA has a broad definition of the type of plans it covers: any plan, fund, or program established or maintained by an employer that provides retirement income to employees or at least results in deferred income to employees until after their employment is terminated is covered by ERISA.
Who is a pension plan fiduciary?
Under ERISA a person is a fiduciary with respect to an employee pension plan to the extent that he or she exercises any discretionary authority or control regarding management of the plan or exercises any authority of control regarding management or disposition of its assets.
What are the duties of a fiduciary of an employee pension plan?
ERISA describes the duties of a fiduciary for an employee pension plan in three components. First, the fiduciary has a duty of loyalty regarding the plan and must act for most in the interest to the participants and beneficiaries of the plan. Second, ERISA imposes what is known as the "prudent man" obligation, which is an unwavering duty to act both as a prudent person would act in a similar situation and with single-minded devotion to those same plan participants and beneficiaries. Third, an ERISA fiduciary must act with the exclusive purpose of providing benefits to plan beneficiaries. The duties charged to an ERISA fiduciary are the highest known to the law.
When a court is asked to enforce a fiduciary's duties, the focus is not only on the merits of transactions that they have caused the plan to engage but also on the thoroughness of the investigation into the merits of the transaction.
Who is a beneficiary?
A beneficiary is a person identified by a participant in an employee pension plan or who is identified by the terms of the plan that is or may become entitled to receive plan benefits. A plan participant is an employee or former employee of the employer who is or may become eligible to receive benefits from the plan.
A single individual can be both a beneficiary and a participant.
What are an employer's duties regarding an employee pension plan?
An employer that is a fiduciary must act solely and only in the interest of the employee pension plan's participants and beneficiaries. The employer must put the interests of the plan and its participants and beneficiaries foremost. It may not manipulate the plan to advance some other business purpose or such as the company's image or finances.
An employer that is a fiduciary may not make material misrepresentations or omissions about the plan. Examples of material misrepresentations or omissions include the following: repeated assurances that plan benefits could not be terminated after the employees' retirement; misrepresentations about proposed future changes to an ERISA governed plan; failing to affirmatively disclose information where the fiduciary knows that silence might be harmful; misleading communications to plan participants regarding eligibility or extent of available benefits.
What rights does a plan participant have to information about the employee pension plan?
Every participant in an ERISA covered plan has the right to the following information:
- To receive a Summary Plan Description (SPD) which should be a description of the plans' terms in language that is understandable to a layman.
- To obtain a copy of all governing plan documents from the plan administrator.
- To obtain a copy of the plan's most recent annual financial statement.
These documents must be requested in writing from the plan administrator, who has 30 days from receipt of the request to answer.
Other than the employer does anyone else have fiduciary obligations to an employee pension plan?
All persons who are paid to advise or manage an ERISA-covered employee pension plan have a fiduciary duty to the plan and its participants.
What do I do if my employer has breached its fiduciary duty?
Many plans have internal claim and review procedures that must first be used. Courts usually require that participants utilize these internal procedures before a lawsuit may be filed. There are also time limits to take action in these procedures and it is a good idea to consult with an attorney, even at this stage to make sure that you protect your rights.
Plan participants and beneficiaries may sue under ERISA when their fiduciaries have breached their obligations. There are time limits to this as well.
A fiduciary to an ERISA plan may be liable for any plan losses resulting from the breach of fiduciary duties.