How Can I Tell If My Benefit Plan Is Governed by ERISA?

ERISA is a federal law that governs employee benefits. The term ERISA is shorthand for the federal Employee Retirement Income Security Act of 1974. Most people have never heard of ERISA, but its comprehensive scope impacts the vast majority of American workers and their dependents and beneficiaries. The original intent behind ERISA was to remedy historic pension plan abuses and ensure that workers received the benefits their employers promised. However, just prior to its passage, Congress dramatically expanded the law’s scope. ERISA now covers not only retirement plans, but also encompasses “employee welfare benefits” such as disability benefits, medical and hospital benefits, life insurance, and accidental death insurance.

Takeaways:

• If your private sector employer provides your benefit plan, it is almost certainly governed by ERISA, which limits your legal options if a claim is denied.
• As the law now stands, under ERISA, you cannot request a jury trial, recover punitive damages, or use many state law protections. The rules for challenging a denial are strict and deadline-driven.
• If you purchased your disability or life insurance policy on your own, outside of your employer’s sponsorship, ERISA does not apply and you may have stronger legal remedies under state law.
• If you are a government employee, in most instances ERISA does not apply.
• If you are employed by a religiously-affiliated organization, ERISA may not apply.
• You have the right to request your Summary Plan Description and plan documents from your employer. These documents are your first step in understanding your coverage.
• Acting quickly matters. ERISA imposes specific appeal deadlines, and missing them can permanently forfeit your right to challenge a denial.

Types of ERISA Plans

The first question that is commonly asked is “what is an ERISA plan?” ERISA’s scope is so broad that it covers almost all employer-sponsored benefits with very few exceptions. ERISA encompasses all types of retirement and most deferred compensation plans, along with welfare benefits (see below), and may also include severance benefits and other programs offered by employers. A common misconception which is untrue is that ERISA only governs plans that are “self-funded;” i.e., paid for entirely by employers. On the contrary, ERISA explicitly states  that it also governs insured plans such as disability and life insurance

Most employees in the U.S. workforce receive ERISA-governed benefits. However, retirement accounts and other benefits purchased by self-employed individuals, such as individual disability insurance policies, are not subject to ERISA.

In addition, benefits for government employees, and employees of religious organizations (church plans) are usually ERISA-exempt. For a detailed analysis of these exemptions, see our article on government and church plan exceptions to ERISA

While many of the specific rules governing ERISA are highly technical, the following discussion tries to simplify the main principles.

Retirement Benefits

Anyone who works for a private-sector organization which sponsors retirement benefits such as pension plan or a 401(k) plan (or 403(b) for non-profits) receives an ERISA-governed benefit that becomes vested; i.e., non-forfeitable so long as the employee works for the employer for a sufficient number of years.

ERISA imposes reporting and disclosure requirements on employers, along with fiduciary obligations on any party who is responsible for managing plan investments and making benefit determinations. These protections help ensure that employees receive the benefits they were promised.

Employers are responsible for providing employees with summary plan descriptions that describe their eligibility to receive benefits, a vesting schedule that shows when benefits become non-forfeitable, and other important plan terms and conditions. Employees are protected against mismanagement by rules requiring that the plan managers act at all times in the employees’ best interest.

In some instances, employers establish deferred compensation programs for highly compensated and/or high-level employees. Those plans are also governed by ERISA but lack fiduciary protections for employees and may be more easily subject to changing eligibility and payment schedules.

Likewise, some employees work for employee-owned companies that are owned by Employee Stock Ownership Plans (ESOP). Those plans are governed by ERISA and benefits may be forfeited in whole or in part if the employee does not work for the company for a long enough period.

Individual retirement accounts are set up and maintained by individuals without employer involvement. Thus, ERISA does not apply to such benefits.

Welfare Benefits

ERISA uses the term “welfare benefit plan.” However, that use of this term in the ERISA statute has no reference to public assistance benefits, but instead describes benefits that are provided for the employees’ welfare such as health, life, and disability benefits.

Regardless of whether such benefits are self-funded or fully insured, they are subject to ERISA. If a dispute arises, many protections offered by state law become unavailable because ERISA preemption overrides state laws that relate to employee benefit plans. For fully insured plans, State insurance laws and regulations that govern the content of insurance policies are an exception, but state laws permitting punitive damages for “bad faith” benefit denials are still preempted.

Health benefits, in particular, can raise issues. Some plans contain anti-assignment provisions, which means that when the employee sees the doctor or is hospitalized, the provider may not have the right to be paid directly by the plan. Also, if the plan is self-funded, participants in those plans may not have the same protections offered by state regulation of insurance.

In addition to the exemption of government (federal, state, municipal) employees and employees of religious organizations, including religiously affiliated healthcare providers, a significant exception may exist if the employee pays all of the premiums for a voluntary benefit and the employer has no responsibility for administering the benefit.

Plans that are set up to benefit only the owners of a business would also be exempt from ERISA; however, if any such plan covers even one non-owner employee, ERISA is implicated, and any claim brought by the employer or an employee would be subject to ERISA’s rules and requirements.

What Is an ERISA “Plan Administrator”?

Every ERISA plan must include a summary plan description (SPD) provided to employees. The SPD offers basic information about the benefit, including rules on eligibility, claims procedures, and procedures for challenging claim denials.

The summary plan description (SPD) is also required to list the “plan administrator.” Typically, the employer serves as the plan administrator, although the plan administrator may be a trustee or an insurance company. The plan administrator’s responsibilities include providing information to employees about the terms and conditions of a plan and to assist employees in enrolling in benefit plans and helping them to process claims.

What Type of Information Is the Plan Administrator Required to Provide?

If an employee has not been provided with a summary plan description, the employee may request a copy from the plan administrator. Employees are also entitled to request additional plan documents such as the actual plan itself or annual reports. If a plan administrator fails to provide required information, the employee may seek penalties and attorney’s fees.

Can ERISA Be Avoided?

ERISA was passed by Congress to provide employees with more protection of their benefits than they had prior to the law’s enactment in 1974. However, that intent has not been fulfilled, and employees may find they have less protection than they would have had prior to the law’s enactment, such as when employers have reserved discretion to interpret plan terms and make benefit eligibility decisions. In such instances, the employee would need to prove the employer acted unreasonably or arbitrarily in order to prevail in challenging a claim denial.

In short, there is no way to avoid ERISA for employer-sponsored group benefits. Employees cannot pay a special premium or make a separate payment to opt out of ERISA coverage for their group plan.

However, benefits purchased individually, outside of an employer arrangement, are not subject to ERISA. For example, a disability or life insurance policy purchased directly from an insurer through an agent or broker is governed by state law rather than ERISA. This distinction can significantly affect your legal rights if a claim is denied. For a full comparison, see our guide to key differences between ERISA and non-ERISA group benefits

What if ERISA Coverage Is Uncertain?

In some instances, it may be uncertain whether ERISA applies. However, ERISA plans are required to file a Form 5500 each year and such filings are publicly available. The filing of such forms is an indication that a plan is governed by ERISA; however, it is not determinative and further investigation may be necessary.

For employees of religiously based organizations, the tax code gives such organizations the option of electing to be subject to ERISA, and it is possible that some plans sponsored by such organizations are exempt while others are not.

Government employee status is also not always clear. For example, employees of public schools are considered government employees and their benefit plans are exempt from ERISA. The same applies to charter school teachers as well. However, some organizations are only quasi-governmental entities, and it is not always clear whether plans sponsored by such organizations are ERISA-governed. In some other instances, though, even as to governmental employees, certain benefits may be provided through their union. If so, that may trigger ERISA coverage.

While ERISA-governed and non-ERISA plans may look similar on the surface, the legal differences become significant if a claim is denied. ERISA limits available remedies, eliminates jury trials, and imposes strict procedural requirements. If a dispute over benefits arises, it is important to contact an experienced employee benefits attorney who can determine whether ERISA applies and guide you through the appropriate process.

If you are based in the Seattle area, our Seattle employee benefits attorneys can help you determine whether your plan falls under ERISA or Washington state law.

How to Determine if Your Benefit Plan Is Governed by ERISA

If you are unsure whether your benefit plan falls under ERISA, the following steps can help you make that determination.

Step 1: Identify Your Employer Type

ERISA applies to private-sector employers. If you work for a federal, state, or local government agency, or for a religious organization, your plan may be exempt. Government employees (including public school and charter school teachers) generally fall outside ERISA. Church plans are also exempt unless the organization has elected to be covered.

Step 2: Check How You Obtained the Benefit

Did your employer provide or sponsor the benefit as part of your employment? If so, ERISA likely applies. If you purchased the policy on your own (for example, an individual disability or life insurance policy), ERISA does not govern that coverage.

Step 3: Review Your Summary Plan Description

Your employer is required to provide a Summary Plan Description (SPD) for any ERISA-governed benefit. The SPD will typically reference ERISA, describe claim procedures, and identify the plan administrator. If you have not received an SPD, you can request one from your HR department or plan administrator.

Step 4: Check for Employer Contributions

If your employer contributes to the plan’s funding or administers the plan in any way, the plan is likely subject to ERISA. Plans that are fully employee-paid with no employer involvement may qualify for a DOL safe harbor exemption.

Step 5: Look for Form 5500 Filings

ERISA plans are generally required to file a Form 5500 annually with the Department of Labor. These filings are publicly available and can be searched online. While a Form 5500 filing is a strong indicator of ERISA coverage, it is not always conclusive.

Step 6: Consult an Attorney if Uncertain

ERISA coverage is not always clear, particularly for employees of quasi-governmental entities, religiously affiliated organizations, or companies with multiple benefit arrangements. An experienced employee benefits attorney can review your plan documents and advise you on whether ERISA applies and what that means for your rights.

Frequently Asked Questions About ERISA Coverage

What types of benefits does ERISA cover?

ERISA covers most employer-sponsored benefits offered by private-sector companies. This includes retirement plans (such as 401(k) and pension plans), health insurance, disability insurance (both short-term and long-term), life insurance, and other welfare benefits. ERISA does not cover government employee plans, church plans, or individually purchased policies.

Does ERISA apply to my individual disability insurance policy?

No. If you purchased a disability or life insurance policy on your own, outside of any employer arrangement, that policy is governed by state insurance law, not ERISA. ERISA applies only to plans established or maintained by employers or employee organizations.

I work for a church-affiliated hospital. Is my plan covered by ERISA?

It depends. Plans maintained by churches and certain church-affiliated organizations may be exempt from ERISA. However, the boundaries of the church plan exemption are complex, and not all religiously affiliated employers qualify. An employee benefits attorney can review your specific situation.

Why does it matter whether my plan is governed by ERISA?

The distinction affects your legal rights if a benefit claim is denied. Under ERISA, you must follow specific appeal procedures before you can file a lawsuit, jury trials are not available, and recoverable damages are limited. Non-ERISA claims may allow broader legal remedies under state law. Understanding your plan’s status helps you take the right steps to protect your benefits.

How can I find out if my employer’s plan is self-funded or fully insured?

Your Summary Plan Description (SPD) should indicate whether the plan is self-funded or insured. You can also ask your HR department or plan administrator. This distinction matters because self-funded ERISA plans are not subject to state insurance regulations, which can limit your protections.