4 Ways To Prevent An ERISA Claim

large_2941655917When thinking about the retirement plan you offer to your employees, it’s important to be thorough in your knowledge of working with the Employee Retirement Income Security Act (ERISA). Per usual, an ounce of prevention goes a long way in saving your company a high dollar amount when an ERISA claim inevitably surfaces. In this blog, read about 4 ways to prevent costly ERISA claims.

Fiduciary Requirements – The best place to start in avoiding ERISA claims is following fiduciary duties under ERISA. A lawsuit assumes that the employer used the wrong compensation to calculate an employee’s plan benefits.

Record Keeping – It’s important to keep accurate records to determine benefits that are due. If payroll records are inaccurate, a lawsuit could assume that the plan administrator’s records that rely on payroll data were also incorrect to determine plan benefits.  

Defining Compensation – When initially setting up your retirement plan, it’s important how you define compensation. Many companies run into trouble when documents are drafted to define compensation as wages earned rather than wages paid. By using the term “earned”, it could leave room for argument by the employee that they earned more than they were paid. If, in retirement plan documents, compensation is defined as “paid”, it’s more likely to be an open and shut case, provided your payroll records are accurate.

Job Classification – To ensure an employee can’t claim underpayment because of a misclassified job, the employer has two options:

  1. Defend the claim on the basis that it was acting it its capacity as an employer, not in its capacity as an ERISA fiduciary. Decisions on employee classification and how much to pay those employees are nonfiduciary.
  2. Defend the claim that the plan fiduciary has no duty to double-check the employer’s payroll and job classification decisions.

It’s important to ensure you have a strong employer position in the event of an ERISA claim, as they are costly, but certainly avoidable.  A little extra legwork can go a long way. An area in which you shouldn’t have to worry about extra legwork is the task of building your staff. Serenity Staffing can help you find your next star employee! We can handle all screening, scheduling of interviews, and post-interview communication. Contact us today to get the process started! Connect with us on Facebook and LinkedIn to get our weekly blog updates and stay on top of important HR topics.