The Employee Retirement Income Security Act (ERISA) is a complicated piece of legislation. Basically, it protects employers from running out of money as a result of funding pension plans for their employees. It also works for employees because it ensures the integrity of their benefits by preventing the employer from going under.
ERISA was the result of the Studebaker lesson.
The early 1960s saw difficulties in the automobile industry, with intense competition among manufacturers, including Studebaker. To keep its workforce and stay afloat without having to increase salaries, Studebaker increased its employees’ pensions four times. When the company folded in 1963, it was found that it did not have enough funds to pay the pension it promised its workers.
The loss then was pegged at $15 million, worth $114 million in today’s dollars. To prevent another incident of such scale, Congress passed ERISA in 1974, requiring employers to:
· Comply with minimum standard should it start a pension program
· Pay an annual premium for pension insurance
· Inform participants about the status of the pension program
· Get the Department of Labor involved in planning and funding
ERISA has undergone several amendments, but loopholes still exist. For instance, a long-term disability plan isn’t covered by ERISA if:
· It’s from a private insurer
· You work for the municipal or state government
· You work for a diocese
Any problems that arise from these scenario may warrant the help of a long-term disability lawyer to ensure your rights are protected.