When To Hire An ERISA/Employee Benefits Attorney

By Jeff Robertson. Jeff Robertson is an attorney with Barran Liebman LLP, representing plan sponsors and retirement plan service providers in all areas of benefit planning. He can be reached at 503.276.2140 or jrobertson AT barran DOT com.

This article provides a framework for understanding the proper time for a Plan Sponsor to seek the advice of an ERISA/employee benefits attorney. It discusses the legal framework involving employee benefits, the issues to be aware of, and some specific situations where the use of an attorney is appropriate and helpful.

Participants in employee benefit plans are beginning to demand more information. Company directors and officers are beginning to ask more questions. Even the government is awakening, as the Internal Revenue Service and Department of Labor have increased their employee benefit plan enforcement. More frequently, fiduciaries and companies are sued over actions resulting from their employee benefit plans. And someday, participants will not just throw away their 401k plan statements, but actually look and understand their investments and goals.

As greater awareness among all parties involved in employee benefit plans rises, care must be taken to comply with the laws. The Employee Retirement Income Security Act ("ERISA") governs retirement plans (e.g. 401k Plans) and welfare benefit plans (e.g. group health plans, cafeteria plans). ERISA is designed to encourage employers to offer employee benefit plans and minimize financial and administrative burdens. ERISA acts to protect the interests of employees as well as provide tax incentives to businesses providing employee benefit plans. The enactment of ERISA has led to an explosion in employee benefit plans and has created an often complex and confusing legal and administrative environment.

Hiring an advisor to help navigate this environment is an important decision. It is necessary to find an advisor with the right background and expertise to assist you in the particular facts of your situation. Most importantly, it is imperative to find an advisor who cares about you and the efficient professional resolution of your situation. Because the cost of ERISA compliance is often not reconciled with the tax and employee retention benefits to the Company, choosing the right advisor for the right situation becomes essential consideration.

The two seminal issues facing the retirement industry today are "fiduciary liability" and "plan disqualification." Both phrases should send shudders down the spine of anyone associated with retirement plans. Unfortunately, many associated with the retirement industry go about their business uneducated about these frightening realities because they do not know the proper time to involve an ERISA/employee benefits attorney.

ERISA/employee benefits attorneys provide a valuable service to limit the liability of plan sponsors and help protect employees. An ERISA/employee benefits attorney should be involved in any area of merger, acquisition or divestiture. Additionally, an ERISA/employee benefits attorney should be involved anytime a company enacts an employee benefit plan. In situations where a company has not included attorney review in their employee benefit plan implementation, a prudent move is to seek counsel and review of those plan documents and procedures. An experienced and skilled ERISA/employee benefits attorney should be involved or review all aspects of any fiduciary decision or a decision that could affect plan qualification.

Engaging the services of an ERISA/employee benefits attorney must be reconciled with the cost of advice. Many organizations offer plan documents, advice and other consulting services pursuant to employee benefit plan implementation and ongoing administration services in a low-cost bundled approach. A legal review of the services can avoid costly mistakes. Legal counsel can assist a Trustee and/or Company officer or director meet their fiduciary duty relating to prudent retirement plan investments, evaluating potential advisor conflicts of interest, and ensuring provisions to avoid plan disqualification and loss of resulting tax benefits, such as deferred taxation. In fact, almost every contract or document you sign with a "benefits consultant" or "third party administrator" will contain a disclosure telling you, as Plan Sponsor, to hire independent ERISA counsel.

Specific examples of instances appropriate to retain an ERISA/employee benefits attorney:

• Mergers & Acquisition and corporate divestiture due diligence
• Substantial work force reduction: outsourcing or layoffs
• Qualified Domestic Relations Orders ("QDROs")
• Designing Plan Documents, including Summary Plan Descriptions and Notices
• Impact of new legislation

Current qualified retirement plan issues which companies should consider involving an experienced ERISA attorney are:

• Merging an existing Money Purchase Plan with an existing 401k Plan or Profit Sharing Plan due to EGTRRA;
• PPA Compliance and Planning;
• Determining Fiduciary Liability Issues;
• Sarbanes-Oxley Act planning for blackout periods, company stock and audit oversight;
• Providing Investment Advice to Participants;
• 401k Plan Fees; and
• Withdrawal liability from multi-employer pension plans.

Current Welfare Benefit Plan Issues which companies should consider involving an experienced ERISA attorney are:

• Understanding ERISA compliance for companies with a third-party insurance agent or administrator;
• COBRA issues;
• HIPAA Compliance;
• Fiduciary Insurance and Bond Review.

The most common mistake that companies make in seeking advice and counsel is waiting until the Internal Revenue Service, Department of Labor, or a lawsuit forces the company to hire experienced ERISA/employee benefits counsel. This is a large expense that can be avoided with proper planning and seeking advice in the aforementioned situations.

Hiring the services of an ERISA/employee benefits attorney should be a decision made with great care, skill and prudence. The risks of fiduciary liability and the benefits your company and its employees receive from employee benefit plans make that decision an essential decision.

Other articles by Jeff Robertson: Lower Costs or Hidden Problems: The Legal Concerns for ETFs in 401k Plans, The Opportunity Cost and Fiduciary Implications of Retirement Plan Fees and Know When to Hold 'Em, Know When to Fold 'Em: The High Stakes Game of Fiduciary Liability.

Related article: The Importance of Legal Counsel Review by Jeb Graham.