Why Should an Employer Comply With ERISA?
First of all, compliance is not optional; it’s the law! Second, employers can avoid costly DOL penalties. Third, many states allow Participants and Beneficiaries to bring “bad faith” claims against insurers and Administrators who deny benefits. In a state court, they can collect the benefits that were denied plus compensatory damages, such as punitive or treble (triple) damages. Trials in state courts are decided by juries, which often favor the individual participant over a corporation or insurance company. However, ERISA is a federal law which pre-empts state law. ERISA limits damages to the unpaid benefits and does not provide for jury trials. Having its Plan in compliance with ERISA will help an employer avoid a lawsuit in a state court, and perhaps several different state courts. However, being out of compliance creates exposure in either state or federal court. In state court, every aspect of a case is subject to a “de novo” review, including matters that were not even in dispute
