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From the U.S. Department of Labor, Employee Benefits Security Administrations (EBSA):

EBSA releases an ERISA Reporting Guide to assist employers, plan sponsors and service providers in meeting their reporting and disclosure obligations under ERISA. With the assistance of the PBGC, the Reporting and Disclosure Guide for EB Plans provides information and overview charts on basic ERISA disclosures that retirement, group health and other welfare benefit plans must furnish to participants and beneficiaries; PBGC reporting and disclosure requirements for single-employer defined benefit pension plans, and annual reporting requirements for the Form 5500 and Form M-1. This year’s guide contains information on group health plan disclosure requirements under Part 7 of ERISA and the new blackout period notice, which requires 401(k) and other individual account pension plans to provide advance notice when participants’ rights are suspended for direct investments, loans or distributions. Plus a list of EBSA and PBGC resources, including the agencies’ Internet sites that containing laws, regulations and other guidance relating to ERISA’s reporting and disclosure requirements. On 11/20/03 the DOL published news release 03-775(.pdf) èDownload this EBSA ERISA guide (19 page .pdf) or call (866)444-3272.

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The History of EBSA and ERISA

The Employee Benefits Security Administration (EBSA) is responsible for administering and enforcing the fiduciary, reporting and disclosure provisions of Title I of the Employee Retirement Income Security Act of 1974 (ERISA). At the time of its name change in February 2003, EBSA was known as the Pension and Welfare Benefits Administration (PWBA). Prior to January 1986, PWBA was known as the Pension and Welfare Benefits Program. At the time of this name change, the Agency was upgraded to a sub-cabinet position with the establishment of Assistant Secretary and Deputy Assistant Secretary positions. Click here to read general DOL information about Your Fiduciary Responsibilities (16 page .dpf) and here specifically related to Mutual Funds (2 page .dpf).

The provisions of Title I of ERISA, which are administered by the U.S. Department of Labor, were enacted to address public concern that funds of private pension plans were being mismanaged and abused. ERISA was the culmination of a long line of legislation concerned with the labor and tax aspects of employee benefit plans. Since its enactment in 1974, ERISA has been amended to meet the changing retirement and health care needs of employees and their families. The role of EBSA has also evolved to meet these challenges.  

The administration of ERISA is divided among the U.S. Department of Labor, the Internal Revenue Service of the Department of the Treasury (IRS), and the Pension Benefit Guaranty Corporation (PBGC). Title I, which contains rules for reporting and disclosure, vesting, participation, funding, fiduciary conduct, and civil enforcement, is administered by the U.S. Department of Labor (DOL). Title II of ERISA, which amended the Internal Revenue Code to parallel many of the Title I rules, is administered by the IRS. Title III is concerned with jurisdictional matters and with coordination of enforcement and regulatory activities by the U.S. Department of Labor and the IRS. Title IV covers the insurance of defined benefit pension plans and is administered by the PBGC.  

Prior to a 1978 reorganization, there was overlapping responsibility for administration of the parallel provisions of Title I of ERISA and the tax code by the U.S. Department of Labor and the IRS, respectively. As a result of this reorganization, the U.S. Department of Labor has primary responsibility for reporting, disclosure and fiduciary requirements; and the IRS has primary responsibility for participation, vesting and funding issues. However, the U.S. Department of Labor may intervene in any matters that materially affect the rights of participants, regardless of primary responsibility.  

As a result of the enactment of the Federal Employees' Retirement System Act of 1986 (FERSA), EBSA has fiduciary and auditing oversight of the Thrift Savings Plan that was established by this Act.  

Pre-ERISA Legislation  

Initially, the IRS was the primary regulator of private pension plans. The Revenue Acts of 1921 and 1926 allowed employers to deduct pension contributions from corporate income, and allowed for the income of the pension fund's portfolio to accumulate tax free. The participant in the plan realized no income until monies were distributed to the participant, provided the plan was tax qualified. To qualify for such favorable tax treatment, the plans had to meet certain minimum employee coverage and employer contribution requirements. The Revenue Act of 1942 provided stricter participation requirements and, for the first time, disclosure requirements.  

The U.S. Department of Labor became involved in the regulation of employee benefits plans upon passage of the Welfare and Pension Plans Disclosure Act in 1959 (WPPDA). Plan sponsors (e.g., employers and labor unions) were required to file plan descriptions and annual financial reports with the government; these materials were also available to plan participants and beneficiaries. This legislation was intended to provide employees with enough information regarding plans so that they could monitor their plans to prevent mismanagement and abuse of plan funds. The WPPDA was amended in 1962, at which time the Secretary of Labor was given enforcement, interpretative, and investigatory powers over employee benefit plans to prevent mismanagement and abuse of plan funds. Compared to ERISA, the WPPDA had a very limited scope.  

ERISA

The goal of Title I of ERISA is to protect the interests of participants and their beneficiaries in employee benefit plans. Among other things, ERISA requires that sponsors of private employee benefit plans provide participants and beneficiaries with adequate information regarding their plans. Also, those individuals who manage plans (and other fiduciaries) must meet certain standards of conduct, derived from the common law of trusts and made applicable (with certain modifications) to all fiduciaries. The law also contains detailed provisions for reporting to the government and disclosure to participants. Furthermore, there are civil enforcement provisions aimed at assuring that plan funds are protected and that participants who qualify receive their benefits.  

ERISA covers pension plans and welfare benefit plans (e.g., employment based medical and hospitalization benefits, apprenticeship plans, and other plans described in section 3(1) of Title I). Plan sponsors must design and administer their plans in accordance with ERISA. Title II of ERISA contains standards that must be met by employee pension benefit plans in order to qualify for favorable tax treatment. Noncompliance with these tax qualification requirements of ERISA may result in disqualification of a plan and/or other penalties.  

Important legislation has amended ERISA and increased the responsibilities of EBSA. For example, the Retirement Equity Act of 1984 reduced the maximum age that an employer may require for participation in a pension plan; lengthened the period of time a participant could be absent from work without losing pension credits; and created spousal rights to pension benefits through qualified domestic relations orders (QDROs) in the event of divorce, and through pre-retirement survivor annuities. The Omnibus Budget Reconciliation Act of 1986 eliminated the ability of employers to limit participation in their retirement plans for new employees who are close to retirement and the ability to freeze benefits for participants over age 65. The Omnibus Budget Reconciliation Act of 1989 requires the Secretary of Labor to assess a civil penalty equal to 20% of any amount recovered for violations of fiduciary responsibility.  

The department's responsibilities under ERISA have also been expanded by health care reform. The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) added a new part 6 to Title I of ERISA which provides for the continuation of health care coverage for employees and their beneficiaries (for a limited period of time) if certain events would otherwise result in a reduction in benefits. More recently, the Health Insurance Portability and Accountability Act of 1996 (HIPAA) added a new Part 7 to Title I of ERISA aimed at making health care coverage more portable and secure for employees, and gave the department broad additional responsibilities with respect to private health plans. 

U.S. Department of Labor

Frances Perkins Building

200 Constitution Avenue, NW

Washington, DC 20210

03/25/05 News:  From the Fifth Circuit - 401(K) Participants Unable To Recover For Fiduciary Breach when only subset of participants are affected, they held that a group of participants lacked standing to sue under ERISA Section 502(a)(2) for alleged fiduciary breaches in connection with a blackout period. Essentially, two 401(k) plan participants brought a class action against their employer & the 401(k) plan TPA, after the accounts of class participants were transferred in the course of a corporate acquisition. The TPA gave participants notice there would be a blackout period when their accounts were transferred. But they argued the employer & TPA misrepresented how & when the accounts would be transferred & because of their failure to make the transfer in a timely and prudent manner, the values of the accounts were greatly decreased & they claimed the employer & TPA breached their fiduciary duties, and requested money be paid to the plan and allocated among their individual accounts in proportion to their losses. The district court dismissed the participants’ suit, and the participants appealed. The Fifth Circuit upheld the dismissal concluding the TPA was not a fiduciary, noting that transmitting the blackout notices and forms was nothing more than an administrative or ministerial service and the participants lacked standing to sue their employer for breach of fiduciary duty under ERISA Section 502(a)(2) because fiduciary claims cannot be for individual relief, noting that the participants alleged breaches of fiduciary duty that harmed only a subset of the individual accounts in the plan. The Sixth Circuit and others have held otherwise, finding that a subclass of beneficiaries can sue under ERISA Section 502(a)(2) meaning that [in 401(k) plans] a lawsuit under ERISA Section 502(a)(2) would be possible only if every participant in the plan was harmed by the fiduciary breach. The court's  noted that the lawsuit could benefit the plan as a whole either when all participants would benefit from the recovery or when “the suit seeks to vindicate the rights of the plan as an entity when alleged fiduciary breaches targeted the plan as a whole.”  [Milofsky v. American Airline Inc., 2005 U.S. App. LEXIS 4449 (5th Cir. 2005)] www.ca5.uscourts.gov/opinions/pub/03/03-11087-CV0.wpd.pdf   Plan sponsors and other 401(k) plan fiduciaries should exercise extreme caution in entering a blackout period—if actions MUST be completed fast, plan losses may result in lawsuits.

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