|
|
|
Yes. Federal law, including the Employee Retirement
Income Security Act (ERISA), the Age Discrimination in Employment Act (ADEA),
and the Internal Revenue Code (IRC), provides certain protections for the
employee benefits of participants in private sector pension and health
benefit plans.
If your employer offers a pension plan, the law sets
standards for fiduciary responsibility, participation, vesting (the
minimum time a participant must generally be employed by the employer to
earn a legal right to benefits), benefit accrual and funding. The law also
requires plans to give basic information to workers and retirees. The IRC
establishes additional tax qualification requirements, including rules
aimed at ensuring that proportionate benefits are provided to a
sufficiently broad-based employee population.
The U.S. Department of Labor, the Equal Employment
Opportunity Commission (EEOC), and the IRS/Department of the Treasury have
responsibilities in overseeing and enforcing the provisions of the law.
Generally, the U. S. Department of Labor focuses on the fiduciary
responsibilities, employee rights, and reporting and disclosure
requirements under the law, while the EEOC concentrates on the portions of
the law relating to age discriminatory employment practices. The
IRS/Department of the Treasury generally focuses on the standards set by
the law for plans to qualify for tax preferences. |
|
|
|
Neither ERISA nor the IRC requires employers to give
employees the choice of remaining in the old formula. Employers have
several options, including:
-
Allowing employees to remain under the old formula,
while restricting new hires to the new formula
-
Stipulating that certain employees who have reached
a specific length of service or who have reached a certain age may
choose to stay with the old formula
-
Providing no choice, replacing the old formula and
applying the new formula to all participants
The law permits employers to have such flexibility, but
whatever option applies has to satisfy legal requirements. For example,
the option may not violate prohibitions against discrimination on the
basis of age.
Under each of these options, benefits already earned by
the participants, as of the effective date of the amendment that converts
the old formula to a cash balance formula, may not be reduced.
|
|
|
|
Many employers voluntarily provide helpful information
about these conversions in advance of the change becoming effective.
Participants have a right to contact the plan administrator and ask for
more information or help in understanding the change and any choices they
have in conjunction with the change.
Plan administrators are required to give at least 15
days' advance notice of plan amendments that significantly reduce the rate
at which plan participants earn benefits in the future.
After the plan is amended, the plan administrator is
required to provide all plan participants with a Summary of Material
Modifications to the plan or a revised Summary Plan Description. This
document will summarize the changes to the plan.
In addition, under the Age Discrimination in Employment
Act (ADEA), an employer requiring an employee to sign a waiver of rights
and claims when choosing between plans is required to provide enough
information to enable the employee to make a knowing and voluntary
decision to waive ADEA rights. In most cases, an employee must be given at
least 21 days’ to sign the waiver and at least 7 days’ to revoke the
agreement.
For more information about the waiver
of ADEA rights, go to the EEOC
Web site. |
| |
|
