Employment Law - Retirement

Front 1

ERISA

Back 1

- this is the primary federal law related to employee benefits
- enacted mainly to combat abuses in the administration and investment of private pensions
- Applies to other employer sponsored/employer provided benefits
- Does not require employers to provide pensions/other benefits, however if they do provide them there are certain minimum standards that need to be satisfied.

Front 2

ERISA Covered plan types

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1) Pension plans
2) Welfare benefit plans

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§510 of ERISA (discrimination)

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prohibits the discharge of an employee to prevent benefit accrual and discrimination against any beneficiary for:
1) asserting their rights under ERISA or
2) retaliating against an employee for exercising their rights under the statute.

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§510 of ERISA (discrimination) - Showing

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must show the employer acted with the intent to deprive the employee of health benefits.
Genearally requires:
1) Discharge shortly after notifying employer of disease
2) Failure to follow normal termination procedures
3) Incentive to avoid high medical costs

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§510 of ERISA (discrimination) - Outsourcing

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- The employer’s sole motivation must be to avoid paying for employees’ ERISA benefit plans.
- VERY HARD for employees to be successful with outsourcing claims (under §510) because it is relatively easy for employers to articulate a legitimate, nondiscriminatory reason for outsourcing.
- These claims are analyzed under the McDonnell Douglas Framework

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ERISA Preemption

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- Gives BROAD preemption of “any and all state laws insofar as they may now or hereafter relate to any employee benefit plan”

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Employment Benefits - Eligibility Standards

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(Zambrano v Reinert):
Determined by the states

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Employment Benefits - Administrative standards

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These are how the benefits are paid.
- These are subject to the “when Due” clause of the social securities act.

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Reasonable factor other than age (RFOA)

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- Defense to age discrimination.
- If there is a reasonable factor other than age then it will be ok to discriminate.
- Not a hard burden to meet.

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Defined Contribution Plans (Def)

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This is where employee (and maybe employer) make contributions to the plan and then they are invested.

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Defined Contribution Plans (Duties) - Owed to

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- The plan administrator owes a duty to the individual employees, and their accounts.
- So an employee can sue for effects to their account alone.

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Parties in Interest

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These are anyone who have an interest in the plan (e.g. professional service providers, plan beneficiaries, etc.).
- They are not liable for plan losses.

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Defined Contribution Plans (Duties) - Owed by

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Owed by Fiduciaries of the plan.
- Corporation: Not fiduciaries unless they are names as the administrator
- Officers: Not fiduciaries unless
1) officially designated as an administrator AND
2) officially given individual discretion.

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Defined Contribution Plans (Duties) - Duty Owed

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- Exclusive beneficiary Rule :
Fiduciaries have to make decisions only with an eye to the beneficiaries of the plan
- Deference (arb &cap) (Firestone):
Absent a breach of loyalty, fiduciaries’ actions will be upheld as long as they are not arbitrary and capricious.

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Exclusive beneficiary Rule

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Fiduciaries have to make decisions only with an eye to the beneficiaries of the plan

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Defined Contribution Plans (Duties) - Duty Owed - Co-fiduciary (3)

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fiduciary can be liable of a breach by a co-fiduciary if she:
1. Knowingly participates in or conceals the breach
2. Enables the co-fiduciaries breach by her own breach; OR
3. Has knowledge of the co’s breach and does not make reasonable efforts to remedy it

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Defined Benefit Plans (Duties) - Duty Owed

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- Exclusive beneficiary Rule :
Fiduciaries have to make decisions only with an eye to the beneficiaries of the plan
- Deference (arb &cap) (Firestone):
Absent a breach of loyalty, fiduciaries’ actions will be upheld as long as they are not arbitrary and capricious.

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Defined Benefit Plans (Duties) - Owed by

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Owed by Fiduciaries of the plan.
- Corporation: Not fiduciaries unless they are names as the administrator
- Officers: Not fiduciaries unless
1) officially designated as an administrator AND
2) officially given individual discretion.

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Defined Benefit Plans (def)

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This is where the benefits are defined regardless of the pay in

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Defined Benefit Plans (duties) - owed to

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Plan administrator only owes a duty to the plan as a whole, not to the individual accounts.
- So an employee can’t bring a suit based solely on their account, they have to allege an effect on the entire plan.

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ADEA Retirement Discrimination - Early Retirement incentive plans (2)

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Ok if
1) Not based solely on age:
Cannot make an incentive plan based on age alone (e.g. if you retire at a certain age you get more/less).
- However it can correlate (e.g. if you retire after a certain # of years of service)
2) Voluntary:
not voluntary if there is fraud, threats of termination, or other forms of coercion, or if under the circumstances a reasonable person would have concluded that there is no choice but to accept the offer.

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ADEA Retirement Discrimination - Exception types (3)

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1) Safe Harbor (ADEA §4(f)(2))
2) Waiver
3) Reasonable Factor Other than Age (RFOA)

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ADEA Retirement Discrimination - Exception - Safe Harbor (ADEA §4(f)(2))

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Can discriminate based on age as long as they are giving the same amount of $ even if the older employees get less benefits.

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ADEA Retirement Discrimination - Exception - Waiver (4)

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Can waive ADEA rights if:
1) Free and voluntary choice
2) 21 days to decide and 7 day rescission period
3) Understandable to a lay person
4) Recommends that they consult council

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ADEA Retirement Discrimination - Exception - Reasonable Factor Other than Age (RFOA)

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If there is a reasonable factor other than age then it will be ok to discriminate

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ERISA Changes

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Employers are generally free under ERISA to modify, or terminate welfare plans at any time for any reason.

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ERISA Changes Exception types (3)

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1) Estoppel
2) Breach of Fiduciary Duty
3) Vesting

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ERISA Change Estoppel Exception (4)

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Must show:
1) Knowing misrepresentation
2) that was made in writing
3) that employees reasonably relied on: If they are presented with information to the contrary in another document then their reliance is not reasonable.
4) To their detriment

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ERISA Change Breach of Fiduciary Duty Exception

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An employer only breaches its fiduciary duty by lying to the employees to induce them to surrender their benefits.

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ERISA Change Vesting Exception

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Once a right to a benefit has been vested it cannot be taken away uness the business ends.

- Ways to vest: A right will vest in one of two ways:
1) 100% after 5 years; OR
2) 20% each year starting the 3rd year.