ERISA

The Employee Retirement Income Security Act (“ERISA”) creates obligations for financial advisors, money managers and brokerage firms in provide investment advice for qualified employee benefit plans.

Title I of the Employee Retirement Income Security Act (ERISA) is designed to safeguard the interests of participants and their beneficiaries in employee benefit plans. This segment of ERISA sets forth rigorous requirements for the sponsors of private employee benefit plans, mandating that they furnish participants and beneficiaries with comprehensive information about their plans. Furthermore, individuals who manage these plans are held to high standards of conduct, which are rooted in the common law of trusts but are specifically adapted to apply to all plan fiduciaries under ERISA.

Under ERISA, investment professionals involved with these plans are required to adhere to a prudent standard of behavior, ensuring that they act in the best interests of the participants. This fiduciary duty is central to maintaining the integrity and effectiveness of employee benefit plans. Additionally, ERISA stipulates precise requirements for reporting to governmental authorities and for disclosure to participants, aiming to promote transparency and accountability in the management of these plans.

ERISA also includes civil enforcement mechanisms that are crucial for protecting the assets of ERISA-regulated plans and ensuring that participants who are eligible can indeed receive their benefits. These provisions are vital for the prevention of mismanagement and misuse of plan funds, providing a legal framework to address violations and enforce compliance.

ERISA attorneys play an essential role in this landscape. They are familiar with navigating the complexities of ERISA regulations, helping plan sponsors, fiduciaries, and participants understand their rights and obligations. These attorneys are adept at handling issues related to compliance, reporting, fiduciary responsibilities, and the civil enforcement of ERISA provisions. Whether assisting in the design and implementation of compliant plans, advising on fiduciary responsibilities, or representing clients in disputes or litigation under ERISA, these legal professionals ensure that the protections intended by ERISA are effectively realized.

For anyone involved with employee benefit plans, whether as a sponsor, fiduciary, or participant, consulting with an experienced ERISA attorney is invaluable. These experts provide critical guidance and support, helping to navigate the regulatory requirements, avoid potential legal pitfalls, and address any issues that arise in the administration of these complex plans. Their knowledge and skills are crucial for ensuring that the plans operate within the legal framework set forth by ERISA, thereby safeguarding the interests of all parties involved.

ERISA advisors have a duty to make sure that investments are suitable for the strategy of the ERISA plan. ERISA Section 404 imposes certain fiduciary responsibilities on plan fiduciaries that are grounded in basic principles of trust law. In addition, the prohibited transaction rules of ERISA Section 406 expand those fiduciary responsibilities well beyond basic trust principles. Anyone who assumes discretionary authority with respect to an ERISA plan administration or plan assets is a plan fiduciary, which means that a lawyer or another advisor can assume this status unwittingly.

ERISA requires that a fiduciary act “solely in the interest of the plan’s participants and beneficiaries,” for the “exclusive purpose” of providing plan benefits and defraying reasonable administrative expenses, and with the care, skill, prudence, and diligence of a similarly situated prudent person. ERISA also requires fiduciaries to diversify plan investments and, to comply with plan documents to the extent that they are ERISA compliant. ERISA fiduciaries have a responsibility to manage.

An ERISA fiduciary who commits a breach of any fiduciary duty can be held liable for any loss to the plan that results from such breach, plus a civil penalty of 20 percent of such loss. The Supreme Court has ruled that courts may award damages to participants in fiduciary breach actions under certain circumstances. The defalcating fiduciary also may be removed from her position as a fiduciary.