The Employee Retirement Income Security Act (ERISA) is a federal law that was enacted specifically to protect employees who have pensions and invest for retirement through their employers. This includes employees with defined benefit pension plans, 401(k) plans and employee stock ownership plans. Under ERISA, employers have a number of responsibilities to their employees, and employees have the right to sue their employers for ERISA violations that result in investment losses.
While most employees expect their employers not to do things that could threaten their retirement savings, the unfortunate reality is that employers of all sizes commit ERISA violations with alarming frequency. The following are common examples of ERISA violations that can lead to investment losses – and can justify employees in filing claims for compensation.
Five Common Employer ERISA Violations
Failing to Manage Pension and Retirement Plans for the Exclusive Benefit of Participants
Employers are not required to offer pension and retirement plans, but those that do are required to manage their plans for the exclusive benefit of their employees. Plan managers owe a fiduciary duty to always put participating employees’ interests first and not do things like continue to invest in company stock when they know the stock’s value is likely to drop substantially.
Using Plan Assets for Personal Gain
Employers and plan managers are also prohibited from using plan assets for personal gain. In some cases, company executives, plan managers and other employees have been known to use plan contributions for their own personal benefit or to make improper payments to service providers and other related parties.
Failing to Properly Value Plan Assets
When plan managers buy and sell investments (such as company stock), they are generally required to do so at fair market value. Under most circumstances, they cannot buy company stock for more than it is worth, and they cannot sell assets at a discount for the benefit of parties other than plan participants.
Failing to Adhere to the Terms of the Plan
A major aspect of the protections ERISA affords to employees is disclosure. Employees have the right to know where their contributions are going, and they have the right to know how their retirement savings is being managed. Deviations from the disclosed terms of a plan that result in investment losses will often give rise to ERISA violations.
Failing to Appropriately Select and Monitor Retirement Plan Service Providers
Employers commonly engage third-party administrators and other service providers to manage their employee benefit plans. If your employer selected a third-party service provider without conducting the necessary due diligence, or if you suffered investment losses because of a service provider’s negligence or misconduct, your employer could be liable for your losses under ERISA.
Speak With an ERISA Attorney at Zamansky LLC
If you have suffered significant losses in a pension plan or employer-sponsored retirement plan, it is important that you speak with an attorney to find out if you may be entitled to financial compensation. At Zamansky LLC, we represent employees in ERISA claims nationwide. To learn more about your rights under ERISA, call our offices at (212) 742-1414 or contact us online for a free consultation today.