My 20-something years as a senior-level communicator serving large corporate clients have led me to some strange places indeed. There was the time I was hired to write the announcement speech for a secret product launch which was to include two “endings” so that the executive speaker could choose the one most appropriate, based on the audience’s (employees’) reaction. Then there was the time I was entrusted with drafting a series of “confidential” documents outlining a marketing strategy that would ultimately be vetted through no fewer than 43 people (not kidding), leaving me to wonder who didn’t know about this particular plan. In short, I’ve been fortunate in that I’ve not wanted for intrigue and interest during most of this journey so far.
There’s intrigue, and then there’s harsh complexity. That’s where the subject of employee benefits comes in. In the marketing communications arena, I’ve habitually viewed those communicators who can tackle this subject matter with even moderate fluency as the rock stars of our profession. Why? Employee benefits are like the second cousin of fixed income securities: they are complex, rarely intriguing, lack any hint of excitement and are almost always dry and loaded with tedium. Usually, only communicators with superior attention to detail and a solid grasp of the regulatory backdrop dare to tread on this subject, and with good reason.
After obtaining a law degree it occurred to me that my ability to swiftly and effectively communicate on this complex topic was supported by a more robust understanding of the regulatory environment that drives this arena. As such, the following is the first in a series of a few short articles for those non-lawyer communicators seeking a clear, simple roadmap to this rather annoyingly complicated landscape.
ERISA – What it Is
To know employee benefits you have to begin with ERISA. The Employee Retirement Income Security Act is a federal law, to be blunt, administered by the Employee Benefits Security Administration (EBSA). The provisions of Title I of ERISA cover most private sector employee benefit retirement plans. Such plans are voluntarily established, and maintained by the employer. Sometimes, they are maintained by more than one employers, or even an employee organization, for example. These plans include pension plans (defined contribution or defined benefit), simplified employee pension plans (SEPs) and 401(k) plans, as well as profit-sharing and stock-bonus plans, along with employee stock ownership plans, or ESOPs.
The most important thing to start with is that ERISA does NOT apply to plans established or maintained by government entities or churches for their employees. Plans maintained solely to comply with workers’ comp, unemployment or disability laws are also NOT subject to ERISA. Finally, ERISA does not cover plans maintained outside the U.S.
What it Does
What ERISA does is set uniform minimum standards to ensure that employee-benefit plans are established and maintained in a fair and financially sound manner. Think of it as a regulatory “floor.” Employers can deliver above and beyond what ERISA mandates, but not below the standards set forth in the law.
Here’s a general smattering of what ERISA does:
- Requires plans to tell plan participants what’s going on with the plan, and on a regular basis.
- Sets minimum standards for participation, vesting, benefit accrual and funding.
- Requires plan fiduciaries to be accountable (more on that shortly).
- Gives plan participants the right to a cause of action to sue for benefits and/or breaches of fiduciary duty. (For non-lawyers: you cannot sue unless federal law [or, if applicable, state law] unless there is a basis for the cause of action. Meaning–there has to be either a statutory or a case-law/common law basis for a cause of action. A cause of action is “Negligence,” “breach of contract,” or “breach of fiduciary duty,” or the like.)
- Guarantees payment of certain benefits if a plan goes under, through the Pension Benefit Guaranty Corporation.
ERISA also sets forth requirements that obligate employers to provide promised benefits, and which guide employers when managing and administering private retirement and welfare plans.
Who’s The Boss?
EBSA, along with the Department of Treasury’s Internal Revenue Service (IRS), has the statutory and regulatory authority to ensure that workers receive the benefits they are promised. EBSA has principal jurisdiction over Title I of ERISA, which requires persons and entities that manage and control plan funds to do so according to various standards and duties. They must:
- Manage plans for the exclusive benefit of participants and beneficiaries;
- Execute duties prudently and refrain from any activity that constitutes a conflict of interest;
- Comply with limitations on certain plans’ investments in employer securities and properties;Â
- Fund benefits in line with the law and plan rules;
- Report and disclose plan info both to participants and to the government; and
- Comply with investigations whenever necessary.
ERISA also sets forth standards and rules for plan fiduciaries. Individuals who exercise discretionary authority or control over plan management or disposition of plan assets are “fiduciaries” for the purposes of Title I of ERISA. The discharge of these duties must be executed solely in the interest of plan participants and beneys and for the exclusive purpose of providing benefits and mitigating reasonable expensesÂ of administeringÂ the plan. In general, fiduciaries are required to “act prudently” and in accordance with plan documents.Â
I hope this basic foray into ERISA can benefit at least some of you communicators out there faced with a project involving employee benefits. Next up in the series: FAQs on employee benefits – making sense of the offerings. Thanks for reading, and as always, comments/suggestions welcome!