“[ERISA] is an enormously complex and detailed statute... [I]n many ERISA matters, the facts…are exceedingly complicated.” -Chief Justice John G. Roberts, United States Supreme Court (2010)
Since the mid-1970s, ERISA has established pension and health plan benefit standards for private employers. As the number of retirees continues to grow, many individuals are finding their former employer, plan providers, or plan managers are not meeting their obligations for their pension and health benefits. Many companies are also finding new challenges to fully fund and manage benefits programs. This has led to an increase in ERISA litigation for retirees and employers in San Diego, Southern California and throughout the country.
The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that establishes the minimum standards for most voluntary private pension and health plans. ERISA sets forth fiduciary duties for plan managers and those who control plan assets, requires disclosure of plan financing and information, provides for an appeals process, allows individuals to file legal claims for benefits and breaches of fiduciary duty, and establishes federal income tax rules for benefits transactions. ERISA has been modified and updated regularly since it was first enacted, resulting in a complex set of statutes and regulations.
Pension benefit plans are generally divided into defined benefit plans and defined contribution plans. A defined benefit plan promises a specific monthly benefit amount at retirement, usually based on salary, age, and years with the company. A defined contribution plan provides benefits based on how much was contributed and how the investments have performed.
In most cases, defined benefit plans may be able to change the future rate that benefits can be earned but they cannot reduce the amount of benefits you have. In defined contribution plans, the employer can change future contributions or even stop making contributions. Significant changes in your benefits plan may require your employer to notify you in writing before the plan change goes into effect.
Private pension plans are required to provide for vesting of pension benefits after a certain amount of time. Employee contributions are 100% vested from the beginning. In a defined contribution plan, employer contributions are to be 100% vested after 3 years, or 20% per year beginning with the second year on a gradual-vesting schedule. Employer contributions to a defined benefit plan are to be 100% vested after 5 years, or 20% per year beginning with the third year on a gradual-vesting schedule.
ERISA also establishes minimum funding requirements for most pension plans. However, profit sharing and stock bonus plans do not have minimum funding requirements. Under a profit sharing plan, the employer determines how much to contribute to the plan. Stock bonus plans generally provide contributions based on investments in the employer's stock.
ERISA Litigation Claims
Federal law provides for a civil cause of action in ERISA disputes. In most cases, ERISA preempts state laws that relate to employee benefit plans. ERISA cases are generally handled as administrative matters with a federal judge reviewing the claim. There are a number of issues that can bring rise to ERISA litigation both for plaintiffs and defendants.
Most ERISA claims involve an individual filing a claim because they were dropped from coverage or denied benefits. This includes claims against the employer, insurer, or advisors. In other cases, an individual may file a claim for breach of fiduciary duty by the plan administrator, pension plan manager, or others who control or manage plan assets.
Defending ERISA Claims
In some cases, an employer may find themselves facing an ERISA lawsuit from a former employee or group of employees. Defending ERISA claims can be complex and involve lengthy litigation. Companies, plan fiduciaries, administrators, and insurers should talk to experienced ERISA litigation attorneys to determine the best course of action for defending themselves and avoiding risk to the company.
Claims Against Plan Providers
ERISA requires qualified plans have a reasonable written procedure for making benefit claims. It also requires an appeals process if your claim is denied. This is usually found in the Summary Plan Description (SPD). In most cases, the participant submits paperwork to the plan administrator. Your plan provider must provide a decision on your claim within 90 days, or up to 180 days if an extension is required.
If your claim is denied, your administrator is required to provide written notice of why your claim was denied and how to file an appeal. After a denial, you have 60 days to request a review of your claim. Your plan administrator then has 60 days to review your appeal, or up to 120 days if an extension is required. Your administrator is then required to provide written notice of whether your appeal was granted or denied, the reason for the decision, and provide a statement of your legal rights to review the decision.
A fiduciary duty is a legal obligation to act in the best interests of another. Retirement benefit plan fiduciaries have certain roles and responsibilities to represent the best interests of the plan participants. This requires acting solely in the interests of the participants. They may be required to diversify investments, follow the plan's requirements, avoid conflicts of interest, and pay only reasonable expenses of administering the retirement plan. The fiduciary typically is also responsible for monitoring investment performance and selecting investment options and providers.
When the plan fiduciary fails to carry out their legal responsibilities, they may be personally liable to plan participants for any losses caused by the breach of their fiduciary duties. Fiduciaries may be liable for lost earnings and any improperly received profits. Talk to your attorney if you believe your plan fiduciary is not acting in the best interests of the participants or if you suspect a conflict of interest.
ERISA Class Action
Retirement plans may cover hundreds or thousands of workers. When a retirement plan provider violates ERISA, wrongfully denies a claim, or a plan sponsor breaches their fiduciary duty, many employees may be affected. Plan participants may have lost millions of dollars in investment savings through unnecessary fees. This may result in an ERISA class action lawsuit to represent the interests of multiple parties.
A class action lawsuit involves a group of similarly situated plaintiffs. To certify a class action lawsuit, the class of people represented should be numerous, they should have a common question of law or fact, the claims of the named plaintiffs should be typical of others in the class, and the named plaintiffs should adequately represent the interests of the entire class.
ERISA Legal Damages
A participant may be looking for certain damages or remedies through filing an ERISA lawsuit. This may include enforcing the terms of the retirement plan, money damages for any financial losses caused by a breach of fiduciary duty, payment for wrongfully denied benefits (which may include retirement, health, disability and life insurance benefits among others), or other equitable relief to redress violations of ERISA.
San Diego ERISA Litigation Attorneys
Butterfield Schechter LLP is San Diego County's largest firm focusing our law practice primarily on employee benefit legal services. We will make sure you are up to date and in compliance with the latest changes in employee benefits law to avoid unnecessary litigation. Contact our office today with any questions on how we can help you either obtain the benefits you are rightfully entitled to, or defend any of the numerous claims that can be brought against you under ERISA.