ERISA benefits are administered by third-party administrators who are paid a fee for services. Requirements imposed by ERISA are vast and are very expensive to properly administer. As third-party administrator, fees are competitive and employers are reluctant to pay the true cost of services, shortcuts are employed and many mistakes are made. The errors committed by third -party administrators are compounded by mistakes employers make in reporting wages and service credits, the buying and selling of plants and divisions and changes in ownership of those plants and divisions. The terms of the plan frequently change either by design, or as a result of changes in law. Third-party administrators often change as well. All of this makes for an environment where tracking historical data is very expensive. Sometimes a refusal to follow the law adds to this problem. As a result, retirement benefit errors are quite common.
The Department of Labor reported this problem back in the mid-90s and that report made the front pages of newspapers all over the US. The general deregulation environment that followed makes it more likely that these particular problems weren't lessened or solved. As employers generally provided less future benefits in the period that followed, retirement benefit computation errors likely increased since the mid 90s.
What can you do to protect yourself?
The first thing that you should do is go to an outside actuary and pay for an independent benefit computation before you retire or soon thereafter. As your employer is the custodian of the records, an independent actuary will be unable to spot many data errors unless you retained some of that information yourself. Employers were required to furnish you accrued benefit statements and summary annual reports annually, a summary plan description when you were hired and when the plan changed materially. Once the mistake is discovered you should bring this to the attention of your HR department. That usually will get things corrected.
What can you do if your employer refuses to correct it?
There is an administrative procedure that you must follow first. Without doing that you may not be able to sue. Besides, the litigation remedy is a last resort because the cost to take your employer to court likely exceeds $100,000 if the employer really fights back. But that costs cuts both ways. It will be almost impossible to find an attorney who will work on contingency fee basis because ERISA restricts the lawsuit to actual benefits lost and does not guarantee that your attorney will even be awarded attorney's fees if you are successful. ERISA attorneys are few in number because of the complex nature of the law and most who work in this area are not litigant attorneys.
As the implication to winning the lawsuit means the employer may have liability from many other employees, it can be expected to fight you very hard. Thus, from a practical point of view, you will not be successful finding an attorney unless the issue that affects you affects other employees where the lawyer could file the action on behalf of a class of employees, referred to as class action lawsuit. But because litigation is seldom practical does not mean that you have no remedy. So many governmental agencies have broad oversight on ERISA matters and depending on the specific issue or issues that affect you determines which oversight agency could work best for you.
In addition, ERISA provides the employee with broad rights to disclosure and the employer with penalties for noncompliance. Your rights to information may have been breached giving you other remedies that may be pursued in court or with the Department of Labor affording you other ways to correct the error. Retaining an attorney to pursue these alternatives may offer the best of both worlds while offering a less expensive alternative. But the longer you wait the less chances you have to correct the problem.
What you can do to protect yourself with Welfare benefit disputes?
Welfare benefits include life, health and disability benefits, often involving insurance products. Even though Welfare benefits offer fewer guarantees and less oversight, you still have many of the same remedies as with retirement benefit disputes. As a vast number of these were triggered by your employer providing them as incentives for retirement, this means there will be a large pool of affected employees which creates the climate for a class action lawsuit. That increases your chances to find an attorney who will sue. You will need the outside help of someone with third-party administration experience and/or the services of an attorney, and if you sue you will need an expert who can help with this class action lawsuit. You almost always need an actuary to establish a loss on complicated welfare benefits related to health.
We can help with both. Jerry Reiss has 40 years of experience providing employers with Third-party administrative services. He also is an actuary and he provided many of those same employers with actuarial services under ERISA. He has extensive experience in court as an expert witness and as a legal consultant over the past 35 years.
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