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Employee Retirement Income Security Act
The Employee Retirement Income Security Act of 1974, commonly known as ERISA, is a U.S federal statute that sets minimum standards for pension plans, health care plans, and some apprenticeship and severance pay plans established by private sector employers in the United States. Originally passed in 1974 to deal with widespread concerns about the fairness and economic soundness of employee pension plans, the most controversial provisions of ERISA are now its preemption of many state laws relating to employee health care plans and the quality of health care delivered through health maintenance organizations.
In general, ERISA does not cover group health plans established or maintained by governmental entities, plans established by churches for their employees, or plans which are maintained solely to comply with applicable workers compensation, unemployment, or disability laws. ERISA also does not cover plans maintained outside the United States primarily for the benefit of nonresident aliens or unfunded excess benefit plans.
ERISA requires pension plans to provide for vesting of employees' pension rights after a specified minimum number of years and to meet certain funding requirements. It also establishes an entity, the Pension Benefit Guaranty Corporation, that will provide some minimal benefits coverage in the event that a plan does not, on termination, have sufficient assets to provide all the benefits employees and retirees have earned. Later amendments to the Act require employers who are withdrawing from participation in a multiemployer pension plan that has insufficient assets to pay all of employees' vested benefits to pay their pro rata share of that unfunded vested benefits liability.
ERISA does not, on the other hand, require employers to establish pension plans; instead it only applies to those plans that an employer has established. ERISA likewise does not, as a general rule, require employers that have established pension plans to provide any minimum level of benefits; instead it regulates the manner in which an employee can obtain vested rights to a pension and the manner in which pension benefits can be reduced because of events such as early retirement or return to work in the industry after retirement. ERISA does, on the other hand, require employers to provide some forms of benefits, such as joint and survivor annuities that allow married couples who have opted for such coverage to provide for continuing benefits to a surviving spouse, that plans might not have offered previously.
ERISA likewise does not require employers to provide any health insurance, but regulates the manner in which such health benefits plans operate. There have been a number of amendments to ERISA expanding the protections available to health benefit plan participants and beneficiaries. One important amendment, the Consolidated Omnibus Budget Reconciliation Act of 1986, better known as COBRA, provides some workers and their families with the right to continue their health coverage for a limited time after certain events, such as the loss of a job. Another amendment to ERISA is the Health Insurance Portability and Accountability Act, or HIPAA, which allows employees to obtain continued coverage for preexisting medical conditions in some circumstances when they move from one plan to another, prohibits some forms of discrimination in health coverage based on factors that relate to an individual's health, and requires stringent privacy protections for certain types of health information. Other important amendments include the Newborns' and Mothers' Health Protection Act, the Mental Health Parity Act, and the Women's Health and Cancer Rights Act.
Many employers that promised "lifetime" health benefits coverage to retirees have attempted to avoid those promises in recent years. ERISA does not provide for vesting of the right to future health care benefits coverage in the way that employees can obtain vested rights to future pension benefits. Employees and retirees who have been promised "lifetime" health benefits coverage may, on the other hand, be able to enforce such promises by suing the employer for breach of contract or by challenging the health benefits plan's right to change its plan documents to eliminate such benefits.
ERISA also requires plans to provide participants with information about plan features and funding and their own right to benefits. It requires those who manage and control plan assets to act as fiduciaries. It requires plans to establish a grievance and appeals process for participants to get benefits from their plans and gives participants the right to sue for benefits and, with a number of judicially-created limitations, to seek relief for breaches of fiduciary duty. Participants and beneficiaries are, in many cases, required to exhaust a plan's internal appeals procedure before suing the plan for benefits.
A number of bills have been introduced in the United States Congress that would limit the circumstances in which ERISA prevents employees and dependents covered by an ERISA group health plan from suing health maintenance organizations over health care decisions made by the HMO. Those efforts have, to date, failed to make any significant changes in this area.
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