Governmental Plans Are Exempt From ERISA

The Employee Retirement Income Security Act is an important document with a name that speaks for itself--it gives retired employees the right to a secure income. Some people in Harris, Texas, are aware of the law but few attempt to enforce it through federal court challenges. This is because it is not often necessary for groups to pursue former employers that infringe on employee rights such as this. But a recently concluded case involving a group of retired transit system employees in Louisiana sought to enforce ERISA, who failed to do so.

That group once worked for a privately-held company that operated the New Orleans transit system until the early 1980s. That company, known as New Orleans Public Service Inc., transferred this group of employees to Transit Management of Southeast Louisiana (TMSEL) Inc. after the transit system became publicly held. The Regional Transit Authority (RTA) owned the system while TMSEL operated it. Eventually, the group involved in the legal case would retire from TMSEL.

The lawsuit was filed in December 2012, accusing the RTA and TMSEL of violating ERISA. According to the claim, the two organizations had failed to maintain the guarantees listed in the employee benefit plan for retirees. Premium-free medical insurance, deductible reimbursements, and quarterly Medicare premiums were denied. According to the retirees, these things were promised in their retirement plans.

But their attempts failed due to a ruling made by the U.S. Supreme Court in 1971. According to that ruling, any governmental plan is excluded from the protections provided by ERISA. So, the question was whether the plan initially provided by a privately-held company but now provided by TMSEL and the RTA would be considered governmental. In the end, criteria from the National Labor Relations Board was used and it was determined that TMSEL and the RTA are political subdivisions, agencies or instrumentalities of the United States or a single state; Louisiana, in this case. Such pursuits are complicated and seeking the help of a lawyer in such cases is a wise decision.

Source: Bloomberg BNA, "Court Cites Governmental Plan Exemption Under ERISA in Dismissing Retirees' Claims" No Author Given, May. 14, 2013

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