The Employee Retirement Income Security Act (ERISA) has been protecting the rights of individuals who participate in qualifying retirement and health plans since 1974.
Of course, as with any regulation, that protection comes at a cost, and that cost usually takes the form of inefficiencies, including additional paperwork, red tape, and/or hoops through which employers and plan administrators must jump to minimize their potential legal liability.
In order to maintain above-board benefits management and avoid ERISA complaints as well as the accompanying legal expenses, there are a number of different strategies that employers, human resources professionals, and/or plan administrators may wish to consider adopting.
Because strict compliance with policy is expected, it’s important to stay up-to-date with any changes that may develop in the application of the law, which can be accomplished through regular training sessions with key staff members as the relevant legal guidelines change over time. Regular audits of internal processes is also advisable to ensure strict continued compliance as internal processes organically evolve, as well.
Prioritizing timeliness, transparency, and thoroughness in all plan-related communications with participants is another crucial element of legal liability minimization. At a minimum, communications, summaries, and annual reports should be delivered prior to statutorily mandated deadlines, of course. Further, by providing a comprehensive and detailed accounting of plan features, as well as information about how the plan is administered and what rights and responsibilities are maintained by plan participants, employers reduce their legal exposure via good faith disclosure. As a result, participants are less likely to be caught off guard about any given issue they encounter, which in turn may make them less motivated to involve the legal system in the first place.
Investing in fiduciary liability insurance is another advisable course of action. Of course, plan sponsors should endeavor to maintain the highest standards when it comes to acting in their clients’ best interests, but in situations where subjectivity can come into play - whether in relatively small matters such as the determining the ‘reasonableness’ of fees or with regard to more significant decisions, including assessing risk tolerance and/or potential conflicts of interest - having the protection of fiduciary liability coverage provides an additional layer of security.
And lastly, even with a highly trusted and experienced internal team in place, procuring the services of a seasoned benefits advisor is often a good idea when it comes to navigating the ever-changing waters of ERISA compliance. Combining the your team’s company-specific experience and internal process familiarity with the outside perspective and subject-matter expertise that an external benefits advisor can bring to the table may be the single best way to grapple with ERISA intricacies, close exposure gaps, and even develop preventative strategies to further minimize vulnerability to ERISA lawsuits going forward.
When it comes to legal exposure as a result of sponsoring retirement and health plans, companies that adopt a proactive approach tend to fare best. By creating an environment that emphasizes compliance, transparency, and fiduciary duty, employers and benefits advisors can make meaningful progress in limiting company exposure to these kinds of legal actions.
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