Denied ERISA benefits could quickly lead to financial hardship

The Employee Retirement Income Security Act of 1974 (ERISA) helps to protect workers from poverty after retirement. The law creates restrictions on how companies manage pensions and employer-sponsored retirement benefits. Although the name specifically references retirement resources, ERISA also governs employer-sponsored disability benefits.

Companies that offer long-term disability and short-term disability coverage as part of a compensation package are subject to ERISA regulations just like businesses that offer pension benefits. Workers often pay very little attention to disability benefits when accepting a job offer or negotiating an employment contract in part because they may not anticipate ever requiring those benefits.

Most people can’t support themselves without working

While everyone ideally retires later in life, not everyone has medical challenges that would prevent them from continuing to work before they reach retirement age. People often assume that they will remain healthy and productive indefinitely, but life does not necessarily work that way.

Quite a few people develop disabling medical conditions due to genetic predisposition, environmental exposure to pathogens/carcinogens or sudden incidents, like car crashes. Workers with disabling medical conditions could face extreme financial hardship if they cannot quickly and easily access the disability benefits provided by their employers.

Most people need to continue working until retirement to manage their current financial needs and set aside enough resources to retire when they are old enough to do so. The median savings account balance for American families was just $5,300 in 2019, and the last few years likely have not resulted in major changes to that figure. If anything, rampant inflation may have reduced how much income people can allocate toward savings.

Therefore, long-term and short-term disability benefits are often crucial for those suddenly unable to work because of medical challenges. Under ERISA, workers can expect that the company should act in their best interests and can take legal action if it fails to do so. They also have the right to appeal a denied benefits claim. They may also have the option of pursuing litigation if the appeal is unsuccessful but they maintain that the company acted in bad faith.

Those who take prompt action after a claim denial may be able to limit the financial fallout of an unfavorable decision. Learning about ERISA and pursuing benefits even after a claim denial could help workers limit the financial hardship they must endure when a disabling medical condition prevents them from continuing to work.