In civil litigation under ERISA, employers, third-party administrators, plan sponsors, and other entities can face substantial damages and penalties. Our federal defense lawyers have a proven record of success representing clients in ERISA litigation, U.S. Department of Labor (DOL) enforcement proceedings, and related matters.
The Employee Retirement Income Security Act of 1974, better known as ERISA, is a federal statute that establishes certain minimum legal standards for pension and other employee benefit plans offered by private employers. For companies that are subject to ERISA, ensuring strict compliance is of critical importance, as statutory violations can lead to civil litigation involving private plaintiffs (i.e. employees) as well as the U.S. Department of Labor (DOL).
While various provisions of ERISA establish requirements that have the potential to lead to litigation, one of the most important parts of the statute is Section 502. Section 502 establishes numerous requirements with regard to public disclosures and notices to plan participants, and it includes enforcement provisions for the DOL as well as a private right of action for affected employees. In this article, we will cover: (i) some of the key ERISA requirements that have the greatest tendency to lead to litigation; (ii) potential penalties and damages in civil litigation under ERISA; and, (iii) compliance and defense strategies for employers, insurers, third-party administrators, plan sponsors, and other entities (which we may individually and collectively refer to as “covered entities”).
Key ERISA Provisions Subject to Civil Enforcement and the Employee Private-Right-of-Action
1. ERISA Section 209
Under ERISA Section 209, covered entities must furnish statements of total accrued benefits and total nonforfeitable pension benefits, if any, which have accrued, and other reports to former plan participants and beneficiaries. Employers must also, “maintain benefit records with respect to each [employee] sufficient to determine the benefits due or which may become due to such employee.”
2. ERISA Section 502(c)(2)
Under ERISA Section 502(c)(2), relevant covered entities must file annual reports using Form 5500 as required under ERISA Section 104, and they must certify multi-employer plans under ERISA Section 305(b).
3. ERISA Section 502(c)(4)
Requirements under ERISA Section 502(c)(4) include notifying plan participants of benefit restrictions and limitations imposed by applicable provisions of the Internal Revenue Code, furnishing multi-employer plan financial and actuarial reports as required by ERISA Section 101(k), furnishing estimates of withdrawal liability as required by ERISA Section 101(1), and furnishing automatic contribution arrangement notices under ERISA Section 514(e).
4. ERISA Section 502(c)(6)
Under ERISA Section 104(a), covered entities are required to furnish all applicable information requested by the DOL. Failure to furnish requested information can trigger civil litigation under ERISA Section 502(c)(6).
5. ERISA Section 502(c)(7)
ERISA Section 502(c)(7) establishes civil liability and a private right of action for covered entities’ failure to provide blackout notices and to inform plan participants of their right to divest shares of their employers’ stock as required by ERISA Sections 101(i) and (m).
6. ERISA Section 502(c)(9)
Under ERISA Section 502(c)(9)(A), employers can face civil penalties and damages for failing to inform employees of their eligibility for Children’s Health Insurance Program (CHIP) coverage. Under ERISA Section 502(c)(9)(B), plan administrators can face civil penalties and damages for failing to provide a timely and compliant response to any state agency’s request for information subject to disclosure under ERISA Section 701(f).
7. ERISA Section 502(c)(10)
ERISA Section 502(c)(10) contains a host of requirements for covered entities that carry civil fines and the potential for employee litigation in the event of non-compliance. These requirements all relate to the statute’s genetic information requirements, which appear in Sections 701, 702(a), and 702(b).
8. ERISA Section 502(c)(12)
ERISA Section 502(c)(12) applies to the failure to establish and update funding restoration plans for Cooperative and Small Employer Charity (CSEC) pensions. This implicates provisions of the Cooperative and Small Employer Charity Pension Flexibility Act, which applies to charities, volunteer organizations, and educational institutions.
9. ERISA Section 502(m)
ERISA Section 502(m) imposes civil penalties and can result in substantial exposure for covered entities that permit or execute unlawful distributions under Section 206(e) of the statute, which pertains to periods during which a plan is subject to a “liquidity shortfall.”
10. ERISA Section 715
Under ERISA Section 715, covered entities can face civil litigation for failing to provide Summaries of Benefits Coverage to plan participants as required under the Public Health Services Act.
This list is not exhaustive; and, as you can see, the statutory requirements that have the potential to lead to civil litigation under ERISA are extremely technical, nuanced, and complex. As a result, employers and other covered entities must adopt and implement comprehensive ERISA compliance programs, and they must promptly take responsive action (and remedial action, if necessary) promptly upon learning of a possible violation.
Penalties and Damages in Civil Litigation Under ERISA
In enforcement litigation initiated by the DOL, employers and other covered entities can face substantial civil penalties for ERISA violations. The DOL adjusts the ERISA penalty amounts on an annual basis to account for inflation. As of January 15, 2019, the civil penalties for ERISA violations include:
- Violation of ERISA Section 209: $30 per violation
- Violation of ERISA Section 502(c)(2): $2,194 per day
- Violation of ERISA Section 502(c)(4): $1,736 per day per recipient
- Violation of ERISA Section 502(c)(6): $156 per day, up to $1566 per individual request
- Violation of ERISA Section 502(c)(7): $139 per day per recipient
- Violation of ERISA Section 502(c)(9): $117 per day per employee/participant/beneficiary
- Violation of ERISA Section 502(c)(10): $117 per day per participant/beneficiary, subject to a cap of $583,830 for unintentional violations
- Violation of ERISA Section 502(c)(12): $107 per day
- Violation of ERISA Section 502(m): $16,915 per violation
- Violation of ERISA Section 715: $1,156 per violation
Although the dollar amounts for most ERISA violations are fairly small, as noted above, these penalties typically apply on a per-violation and/or a per-day basis. Furthermore, in ERISA civil litigation involving the DOL, employers and other covered entities will often face allegations of violating multiple provisions of the statute. As a result, companies’ potential exposure in DOL enforcement matters under ERISA can be substantial, and it is not unusual for larger employers, insurers, third-party administrators, and plan sponsors to face hundreds of thousands or even millions of dollars in civil penalty liability.
Damages in private civil litigation under ERISA can be equally severe. Due to the nature of ERISA’s requirements, violations will almost always impact a large class of individuals – whether current employees, former employees, or other plan beneficiaries. While technical violations of the statute may result in damages that are de minimus on an individual level, substantive violations that impact the value of participants’ and beneficiaries’ pensions or other benefit plans can result in substantial losses for individual plaintiffs – and even greater aggregate liability for defendant entities.
ERISA Compliance and Civil Litigation Defense Strategies for Employers, Insurers, Third-Party Administrators, Plan Sponsors, and Other Entities
Mitigating potential exposure in civil litigation under ERISA is a two-step process that begins with compliance and ends with strategic defense of DOL and private litigant claims. While the primary goal of implementing an ERISA compliance program is to prevent violations, in the event of litigation, demonstrating adherence to an adequate compliance program can be a key defense strategy. At Oberheiden, P.C., we represent entities that are subject to ERISA in all matters pertaining to compliance and litigation. We have extensive experience working with clients on their ERISA compliance programs, and our attorneys have proven track records in DOL enforcement matters and private civil litigation. When it comes to litigation, our practice focuses solely on defense, and our attorneys’ practices are devoted to representing clients in federal matters.
If your company is being targeted in civil litigation under ERISA, it is important that you seek legal representation promptly. If violations have been committed, remedial action may be necessary to prevent penalties from continuing to accrue and to limit the company’s potential exposure in private litigation. Our federal defense attorneys can quickly assess the circumstances at hand, advise you of your legal risks and options, and execute comprehensive defense and liability mitigation efforts on your behalf. Our attorneys can also interface directly with the DOL; and, if civil charges have not yet been filed, we can seek to resolve the DOL’s investigation informally with minimal exposure.
Regardless of the circumstances involved, civil litigation under ERISA must be taken seriously, and companies cannot afford to underestimate the risks involved. Our attorneys can help protect you, and we encourage you to contact us promptly for a free and confidential consultation.
Speak with an ERISA Defense Lawyer at Oberheiden, P.C.
Headquartered in Dallas, Texas, our firm represents corporations, health care entities, and other clients in ERISA civil litigation nationwide. Our attorneys are licensed to practice in federal jurisdictions across the country, and we can work with local counsel if necessary to represent your company in your jurisdiction’s federal district court. For more information about our compliance and defense services for companies that are subject to ERISA, please call 888-519-4897 or request a free and confidential consultation online today.