Employee Retirement Income Security Act Peoria IL
Employee Retirement Income Security Act
ERISA, Pension Funds & 401(k) s: The Basics
Some of the most common questions regarding ERISA (Employee Retirement Income Security Act), pension funds and 401(k) s have to do with what responsibilities companies have to correctly manage those funds - and what happens when they don't. For answers to these questions, we interviewed Ron Dean, a California attorney who has been practicing ERISA (Employee Retirement Income Security Act) law for over 35 years. Here's what he told us:
Employer responsibilities
What responsibilities does a company have to correctly manage pension funds/401(k) s? According to Dean, "If the company is the plan 'fiduciary,' either because it is named as the fiduciary or because it is responsible for managing the funds, it has the highest duty known in the law. It must put aside its own personal interests and manage the funds solely in the interests of the plan participants and beneficiaries. This does not mean that it must bend over [backwards] for each person's claim because that would take away money from the other participants. Rather, it must act neutrally and not favor one person's interests over another and must be prudent in investing the fund assets."
Mismanagement of funds
In what ways do companies mismanage these funds? According to Dean, it's like watching a soap opera - everything that can go wrong does go wrong. He explained, "I had a case of a doctor who became addicted to day trading the plan's assets. He lost everything - all nine million dollars. Sometimes we'll see someone actually running off with the money. Frequently, a company is in financial trouble and will 'borrow' money from the plan (a big no-no) or will not contribute the employee contributions it withheld from paychecks."
Discovering mismanagement of funds
How would I know if my pension funds/401(k) is not being managed correctly? According to Dean, Sometimes it's easy - if something doesn't smell right, it's probably not right. He says, "You should get a 'summary annual report' every year (if you don't, something doesn't smell right), that will say how much money came in, how much the plan's earnings were (significant negative numbers are an alarm bell), how much the expenses were - in a pension plan, generally these should only be a few percent of assets at most - and how much is left over."
Dean says that if something doesn't look right, you should write to the plan administrator and ask for a copy of Form 5500. This form has all the information you need. If you can't get a straight answer, call your U.S. Department of Labor and file a complaint.
If you've been denied valid benefits under ERISA, consult with an experienced ERISA attorney to discuss your situation and evaluate your options. Consultations are free, without obligation and strictly confidential.
Copyright 2009 Advice Company - All Rights Reserved.