Information about ERISA
Intro to ERISA
The Employee Retirement Income Security Act of 1974 or better known as ERISA is a federal law that sets standards for retirement and health benefits plans in the private industry sector. So this excludes churches and government based jobs. ERISA was enacted in response to abuses of retirement benefits by private-sector employees, to protect such employees against the loss of promised benefits.
ERISA doesn’t require the employer to establish a plan, only to those who establish plans must meet certain minimum criteria. This includes any “employee benefit plan” such as retirement benefits, welfare benefit plans including; medical, accident, disability, death, unemployment, vacation, apprenticeships, training programs, day care, scholarship funds, prepaid legal services and other benefits offered. Under ERISA you must permit employees to participate in a plan if they are 21 or older and have at least on year of service under their belt.
Most of ERISA deals with pension plans, ERISA requires employers who provide pensions or welfare benefit plans to comply with its requirements in regards to: who must be covered, how long a person has to work to be entitled to a pension and how much must be set aside each year to pay future pensions.
There are three main compliance components to ERISA:
- Reporting: All Employers have to submit certain reports to the IRS every year and comply with all U.S Department of Labor requests
- Disclosure: Employers have to advise all employees of certain facts regarding their benefits packages
- Paying Claims: Benefit plans must clearly state out the procedures for processing and paying of all claims- Employers must care for their employee benefits as they would their own assets
HISTORY of ERISA
The history behind the Employee Retirement Income Security Act of 1974 took many years and several different events before it was established. The first employer sponsored pension plans to be established in the United States happened in the late 19th century in the height of the railroad industry. During that time, pensions were regarded as a gift of recognition of years of service, not as a form of compensation protected by law, as it is now. These pension benefits were at the discretion of the employers, often times they were paid out of their annual revenues and could be reduced or terminated if the company became unprofitable or went out of business giving no security to railway workers.
During the 1940’s with WWII, pensions and deferred compensations were exempt from the wartime wage controls. Employers who were unable to offer higher wages due to these controls could increase their workers compensations by offering higher pensions or new benefits to their employees.
In the 1950’s and 60’s private pension plans grew, but unfortunately so did the number of instances in which employers and unions tried to use these assets for purposes other than paying benefits to the retired workers and their dependents. In 1958 Congress passed The Welfare and Pension Plans Disclosure Act to ensure the funds of the worker’s pensions would not be misused. Unfortunately, for Congress this didn’t quite help employers, especially after the Studebaker automobile company terminated its underfunded pension plan in 1963. Leaving thousands of workers and retirees without their hard earned pensions they were promised. So Congress began considering another legislation to ensure the security of pension benefits throughout the private sector so this wouldn’t happen again.
On Labor Day, September 2, 1974, the Employee Retirement Income Security Act was signed into law by President Gerald Ford. Throughout the years ERISA has been amended to continue to provide; greater protection to heirs and spouses of pension plan participants, improve pension funding practices and alter the limits on tax-deductible pension plans. ERISA continues to protect the benefits of employees in most private sector pension plans by requiring companies with defined pension plans to continue to fully fund the benefits employee participants have earned.
Steps to Qualify for ERISA
Before you file for a claim for ERISA be sure to go over your summary plan description/ benefits package with your Human Resources department. Your summary plan description is a detailed overview of how your plan works, what benefits are provided and how to file a claim to receive your benefits. It also goes over your responsibilities and rights under ERISA and your individual plan. You must make sure you meet the plan’s requirements and procedure before filing a claim, sometimes these procedures are in another handout so review them carefully. The summary plan has information containing where to file, what to file and who to contact. Also be aware plans cannot charge for any filing fees or other costs for filing claims and appeals.
If you are unable to find the claims procedure booklet write your plan administrator or human resource department, keep a copy of the letter for your records. Continue to keep all important document copies, including the original claim for your files.
There are several types of claims, all health and disability claims have to be decided within a specific time limit depending on the type of claim filed, so pay particular attention to the details and times when filing.
There are five different types of claims:
- Group Health Claims: are divided into three types: urgent care, pre-service and post service claims, the type of claim determines how quickly a decision will be made
- Urgent Care Claims: are a special kind of pre-service claim that requires quicker action to be made because your health would be threatened if the plan took the normal required time to decide a pre-service claim. If your physician has knowledge of your medical condition can tell the plan that a pre-service claim is urgent, the plan must treat it as such
- Pre-Service Claims: are requested for approval that the plan requires you to obtain before you receive medical care, preauthorization is require on whether a treatment or procedure is medically necessary
- Post-Service Claims: are all other claims for benefits under your group health plan, including claims after medical attention has been provided, such as requests for reimbursement or payment of the costs of services, most claims of group health benefits are these types of claims
- Disability Claims: are requests for benefits where the plan must make a decision of disability to decide the claim
Waiting for a Decision on Your Claim
ERISA has specific time periods per claim to inform you of their decision. The time limits are counted in calendar days, including weekends and holidays. Urgent care claims must be decided as soon as possible taking into account your urgent medical needs, a decision must me made no later than 72 hours after the plan receives your claim. The plan also needs to alert you 24 hours if more information is needed for your case, you will then have no less than 48 hours to respond to their request.
Pre-service claims must be decided within a reasonable time, but no later than 15 days after your claim. If the needed the plan may extend the time period up to an additional 15 days if the plan couldn’t make a decision within the first 15 days. However, the plan must notify you before the end of the 15 days if they are needing to extend it. If this is the case and they need more information you have 45 days to supply it, then the plan has 15 days after your submittal to make a final decision.
Post-service health claims must be decided no later than 30 days after the claim was received. If however the plan needs to extend the time period to review your request they can do so up to an additional 15 days, but they must inform you first at the end of the 30 day period explaining the delay. If more information is requested from the plan you have up to 45 days to supply it, then the plan must make a decision no later than 15 days after you supplied the information. If the plan needs an additional extension they must ask for your permission before more time after the first extension. If your plan is denied partially or wholly before the end of the time allotted for their decision they must notify you.
Disability claims must be decide no later than 45 days after they received the claim. If an extension is needed after the 45 day period they must alert you at the end of such period and inform of the reasons why for the extension. Then they have up to 30 days to complete the request. If more information is needed from you, you have 45 days to supply it. The claim then must decide no later than the 30 day extension of their final decision. If a second extension is needed you must again be notified and they have an additional 30 days to complete it. The plan needs your permission before extending it a second time. If your claim has been denied the plan must send you a written notice with detailed information on why it was denied and information on the appeals process. Additionally the plan must include the plan rules and guidelines or such exclusions used in the decision and provide with you with instructions on how you can request a copy of the plan. They may also send you additional information in which you can appeal your denial.
Appealing a Denied Claim
Claims can be denied for numerous reasons, the services you received could not be covered by your plan or simply they need more information. Whichever the reason you have at 180 days to file an appeal on your claim. Some claims may offer longer claims period so check your summary plan description for more details. When preparing for your appeal be sure to use the information in your claim denial notice. Your plan most provide your requests free of charge including copies of documents, records and any other information needed to claim your benefits. Be sure to include all information related to your claim in your appeal, especially additional evidence or information you want considered and send it in before the end of the 180 day period.
Reviewing an Appeal
Appeals must be reviewed by someone new who looks at all of your information submitted and consults with medical professionals. Urgent care claims are reviewed as soon as possible taking into account your medical needs and are reviewed no later than 72 hours after the plan receives your request to review the denied claim. Pre-service claims must be reviewed no later than 30 days after the denied claim. Post-service claims, must be reviewed no later than 60 days. If the plan needs more time they must first get your consent, if you do not agree to more time the plan must complete their review within the 60 day time limit. Disability claims must be reviewed no later than 45 days after the receive your claim, if an extension is needed the must notify you in writing before the end of the 45 day period explaining why and make take up to an additional 45 days for their final decision.
Plans and exceptions may vary so check with your plan provider or the Department of Labor’s Employee Benefits Security Administration for more information.
If Your Appeal is Denied
Once the final decision of your claim is made the plan must send a written detailed explanation of the decision in plain language that can be understood by the claimant. If the plan’s final decision is to deny your claim you may want to seek legal advice on your rights to bring an action to court to challenge the final denial. Contact your local Employee Benefits Security Administrator or an ERISA attorney for more information and to get help with such appeals.
This article was provided courtesy of Eric Buchanan & Associates August, 2013