Congress passed the Employee Retirement Income Security Act of 1974 (ERISA) to provide protections for individuals in private retirement and health insurance plans. ERISA includes standards concerning fiduciary duties, the provision of plan information, grievance and appeals procedures, and rights to pursue legal remedies. In addition, ERISA addresses plan participation, vesting, benefit accrual, and funding. Finally, ERISA established the Pension Benefit Guaranty Corporation to ensure benefit payments in the case of plan termination.
Judicial interpretations of ERISA provisions over the years have limited the substantive rights of retirement plan participants and beneficiaries. Even when participants and beneficiaries can prove ERISA violations, courts have severely limited the remedies available, thus undermining participants’ and beneficiaries’ rights.
ERISA was generally designed to be the applicable law governing employer-sponsored benefit programs. ERISA thus preempts state laws in order to provide uniformity. In a number of areas, however, courts have interpreted ERISA to deny individuals the protections and benefits of state laws, even when ERISA provides no adequate protection. For example, courts have held that ERISA preempts actions against nonfiduciary violations and preempts state laws against fraud and misrepresentation. The result of preemption in these circumstances is to leave plan participants without a remedy.
EMPLOYEE RETIREMENT INCOME SECURITY ACT: Policy
Strengthening interpretation and enforcement
The Employee Retirement Income Security Act (ERISA) should be interpreted and implemented to give participants and beneficiaries full legal protections.
The Department of Labor (DOL) should strengthen enforcement under ERISA. This may require better and more productive use of resources, additional funds, strengthened audit procedures, and regulatory actions that assist participants and beneficiaries in securing their benefits and protecting their rights.
Public education and information
The DOL and other agencies should improve their efforts to educate plan members about their rights under the plan through the publication of easy-to-understand, culturally and linguistically appropriate pamphlets; public service announcements; and other educational efforts.
Reporting and disclosure
Comprehensive reporting and disclosure requirements must be maintained and enforced. Mandated disclosures, reports, and notices should be provided to participants and beneficiaries in a form that comports with their preferences, is private and secure, adequately conveys important information about retirement plan rights, promotes actual receipt of benefits, and is preserved and accessible decades later. Policymakers should consider setting mandatory penalties for failure to provide required information on plan finances to plan participants.
Remedies under ERISA should be improved so employees can recover all losses due to ERISA violations.Congress should enhance private rights of action under ERISA to supplement the DOL’s limited ability to monitor the benefits system. ERISA should be amended to require the award of mandatory attorney’s fees in successful fiduciary and benefits claim cases, and to allow all courts to award attorney’s fees for work performed during the administrative review process. A court reviewing a disputed ERISA case should examine the relevant contracts and documents for itself (that is, review the case de novo) and not defer to the findings of the plan administrator, who may have an inherent financial conflict of interest.
The DOL should explore alternative dispute resolution forums for those claimants who otherwise would lack adequate remedies.
Where ERISA preempts state law and deprives individuals of rights and remedies available under state law, ERISA should provide an adequate federal remedy.