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Employment Discrimination Blog

Thursday, October 29, 2020

Common ERISA Violations

Most private sector employee benefit plans are subject to the provisions set forth in the Employee Retirement Income Security Act (ERISA). ERISA is a complex federal law that establishes minimum standards with regards to employer-sponsored benefit plans. These benefit plans include 401(k)s as well as Employee Stock Ownership Plans (ESOPs) and Profit-Sharing Plans. When employers provide these kinds of benefits to employees, they must stay in compliance with ERISA regulations. When employers fails to uphold their duties and remain in compliance with ERISA they can face hefty fines and other penalties, not to mention costly litigation that can ensue.

While it is great the employers provide employee benefit programs, especially when so many workers do not get these kinds of benefits, the employers must be prepared to remain in compliance with such regulations as those set forth under ERISA. In the hopes of helping employers avoid running afoul of ERISA regulations, we will discuss some of the more common ERISA violations here.

Common ERISA Violations

When employers are found in violation of ERISA provisions, they may be subjected to fines for the violation. They may also be obligated to make payments to plan participants. In some cases, the employer may be subjected to injunctive relief which requires alterations to company procedures. On top of these potential penalties, employers who are found to have violated their role as fiduciary may be subject to personal liability for losses incurred by plan participants. If a violation of ERISA regulations is found to have been willful, there may be criminal penalties associated with the violation.

One of the most common ERISA violations made by employers pertains to following plan documents and communicating any changes in a plan to participating employees. Plan documents must reflect current ERISA updates, as well as tax regulations and how the plan is implemented. When plan terms and plan operations do not align, this can cause problems. Employers should be sure that plan operations accurately reflect the terms of the plan and should also clearly communicate any changes made to a plan to plan participants.

ERISA plans should clearly set forth compensation regarding contributions and matching contributions. The terms regarding maximum annual additions and elective deferrals should also be clearly defined. This means that the plans should be transparent in setting forth what is considered to be compensation. Compensation may include things like bonuses or pre-tax health insurance premiums as well as tips and commissions and fees for professional services.

Employers should also be aware of the reporting and recordkeeping requirements pursuant to ERISA. Unfortunately, this remains a commonly violated aspect of ERISA. Under ERISA, employers need to maintain records that pertain to employee benefit plans that are subject to ERISA provisions. All records that relate to government filings need to be retained and available for examination upon request for no less than six years from the filing date.

Employment Law Attorneys

As you can see, ERISA violations occur when those who have obligations under ERISA provisions fail to uphold those obligations. If you are an employer who is worried about ERISA compliance or an employee who believes an employer may be in violation of ERISA, Pankey & Horlock is here to help. Contact us today.


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