ERISA

Question 1

Basic Coverage § 1003

Answer 1

Any employee benefit plan established/maintained by (1) an employer in commerce/industry/activity affecting commerce; (2) employee organization representing employees in commerce; (3) or by both

Question 2

Exceptions to ERISA

Answer 2

1. governmental plan
2. church plan
3. plan solely to comply with WC/unemployment/disability insurance laws
4. plan maintained outside the US for benefit of nonresident aliens
5. excess benefit plans: better benefits paid to higher execs

Question 3

Does ERISA pre-empt all state regulation of benefits?

Answer 3

No, ERISA doesn’t apply to state laws relating to employee benefits, but to state laws referring to employee benefit plans specifically. It was meant to regulate benefit plans, not all benefits.

Question 4

ERISA Reporting Requirements

Answer 4

1. annual reports to DOL
2. benefit statements to pariticpants/beneficiaries
3. summary plan description
4. summary of material modifications to participants

Question 5

If an employer is making a change to the plan, what are their obligations?

Answer 5

They can’t mislead employees about the changes, but they have no duty to give notice of them until they happen.

Question 6

SPD Requirements

Answer 6

1. include all required information
2. written so average person can understand it
3. accurate/comprehensive enough to convey rights/obligations of participants
4. contains name and type of plan; name/address of plan administrator; relevant provisions; eligibility

Question 7

Is it an SPD? Test

Answer 7

To determine whether something is an SPD under ERISA, look to see whether it satisfies all of the categories of information required for SPDs under the act

Question 8

Three Types of Pension Plans

Answer 8

Defined Benefit (traditional)
Defined Contribution
Hybrid (cash balance plans)

Question 9

Defined Benefit Plan

Answer 9

• the traditional plan
• not portable unless multi-employer plan
• employee promises benefit upon retirement based on salary/years worked
• employer responsible for funding plan upon retirement
• statement required every 3 years to individuals with non-forfeitable benefits & current employees telling them how much they have accrued and how much is left

Question 10

Defined Contribution Pan

Answer 10

• 401ks, etc.
• portable
• employer makes defined contribution to an individual account for each employee every paycheck
• employees can also contribute
• employee gets certain amount at retirement too
• statement every year to beneficiaries/participants

Question 11

Hybrid Plans

Answer 11

Employer promises to make a defined contribution to each employee’s individual account, based on compensation, which is professionally invested and guaranteed to grow at some fixed rate.

Question 12

When the SPD and plan doc differ, which controls?

Answer 12

The plan doc. The SPD can be reformed in equity, the plan doc can’t and is binding.

Question 13

ERISA Anti-Cutback Clause

Answer 13

Applies to pensions but not welfare plans (like SSN). Only benefits that are not yet accrued or vested can be changed.

Question 14

Can ERISA benefits be withdrawn early?

Answer 14

They can be borrowed against (less than $50k or half the fund) for 5 years. Early withdrawal is also permitted in certain hardship cases (burial/funeral, tuition, etc.).

Question 15

What is the appropriate standard of review for benefits determinations?

Answer 15

When the plan specifically gives discretion to the administrator, it’s abuse of discretion.
If no discretion is given, it’s de novo.

Question 16

How should plan determiantions be made when the plan does not have a provision that addresses the issue?

Answer 16

Apply equitable principles.

Question 17

ERISA SOL

Answer 17

There isn’t one, but administrative remedies must be exhausted first.

Question 18

Standard applied to Plan Administrator

Answer 18

Prudent Man Standard of Care (§ 404)

Question 19

How are conflicts of interest evaluated?

Answer 19

If the fiduciary has discretion, the the standard of review is abuse of discretion, and the conflict is a factor in that analysis.

Question 20

Who has a fiduciary duty under ERISA?

Answer 20

1. named fiduciary in plan docs, or

2. someone who assumed fiduciary responsibilities (execs, but not those advising them)

Question 21

Fiduciary Duties Under ERISA § 409

Answer 21

1. complete loyalty to beneficiaries
2. perform duties as prudent man would (but no presumption of prudence)
3. diversity plan investment to minimize risk
4. follow plan docs consistent with ERISA
5. duty of disclosure to participants/beneficiaries

Question 22

How can a plan be termianted under ERISA?

Answer 22

1. voluntary (standard: benefits accrued are dispersed with notice/distress: insurance applies because employer anticipates it won’t be able to meet its duties)
2. involuntary (PBGC takes over the plan due to insufficient management or funding and provides insurance)