Bench & Bar July/August 2025

FEATURE: COCKTAIL LAW VOL. II

EMPLOYEE BENEFITS for the COCKTAIL PARTY: DAZZLE YOUR FRIENDS BY JOHN R. KIRK AND MICHAELA TAYLOR SHEPPARD

I magine a long day at work, you have had calls and emails up to your eyeballs, and now you have to cap it off with a cocktail hour for a client or prospect or at a foun dation or other social event. You grab your drink and are confronted with your worst nightmare; someone who wants to talk employee benefits. Maybe they have some stock options that are vested or maybe they want to change their company health plans. Whatever it is, they want to hire you. While you don’t have to be an expert, you can at least keep up your end of the conversation until you get back to your phone to call your expert. In general, employers have a great amount of latitude in designing their employee benefit programs, but federal laws and reg ulations have complicated their design and administration. In a world full of acronyms (ERISA 1 , COBRA 2 , HIPAA 3 , ESOP 4 … the list goes on), it can often be hard for even the most seasoned attorneys and profes sionals to make sense of the alphabet soup or even recognize that there may be a ben efits issue at hand. So, if you find yourself conversing about health plan premiums over a glass of Pinot Gris or discussing the administration of retirement plans while sipping a Riesling at your next cocktail party, you will now have some tools to help you spot the issues. A SHORT AND SWEET GLIMPSE INTO THE WORLD OF EMPLOYEE BENEFITS The Employee Retirement Income Security

Act of 1974 (“ERISA”) was enacted to address concerns that private pension plans meant to provide future benefits for retiring workers were instead being fraud ulently managed. 5 Since its enactment in 1974, ERISA has been amended and sup plemented many times to meet the needs of the changing workforce. 6 As it has evolved, many different agencies, including the Department of Labor, the Internal Reve nue Service, and the Department of Health and Human Services, have been tasked with formulating the rules for the admin istration of employee benefits plans. These rules apply not only to the typical qualified retirement plans such as 401(k) and 403(b) plans, but also apply to employee welfare plans ( i.e., group health, life, and disability plans), nonqualified deferred compensation retirement plans, certain bonus and long term incentive plans, severance plans, and equity-based compensation plans. WHAT BENEFITS IS AN EMPLOYER REQUIRED TO PROVIDE? For most of its existence, private sector employers were not required to provide most of the benefits discussed under ERISA. This changed with the Affordable Care Act 7 (“ACA”). The ACA requires employers with 50 or more full-time employees (or equiv alent) to offer health insurance to their full-time employees or face penalties. That health insurance must meet certain criteria. It must be affordable (employees must not pay more than 9.02% of their income for premiums in 2025) and provide minimum essential coverage.

If an employer does choose to offer a par ticular benefits plan, ERISA requires that sponsors of employee benefit plans provide participants with adequate information about their plans and meet specific fiduciary standards of conduct. 8 While the rules are long and often very complicated, failure to comply with the law, even inadvertently, can lead to severe consequences. WHAT IS PLAN FIDUCIARY? These consequences occur due to ERI SA’s fiduciary duty rules. An ERISA plan fiduciary refers to a person or entity that has a legal responsibility to manage an employee benefit plan. 9 For most normal employer-sponsored retirement, health, and welfare plans, the employer or a commit tee of the employer is the fiduciary. As a fiduciary, this individual or entity has the following primary responsibilities: 1. DUTY OF LOYALTY: The fidu ciary must act solely in the best interest of the plan participants and beneficiaries, putting their in terests above their own. 2. DUTY OF PRUDENCE: The fiduciary must manage the plan with care, skill, diligence, and pru dence, making decisions as any prudent person would under simi lar circumstances. 3. DUTY TO FOLLOW PLAN DOCUMENTS: The fiduciary must administer the plan accord ing to its official documents and in compliance with ERISA’s re

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