Human Resources (HR) FAQs

The Employee Retirement Income Security Act of 1974, or ERISA, protects the assets of millions of Americans so that funds placed in retirement plans during their working lives will be there when they retire. ERISA does this by regulating employers who offer pension or welfare benefit plans for their employees.

ERISA is a federal law that sets minimum standards for pension plans in private industry. For example, if your employer maintains a pension plan, ERISA specifies when you must be allowed to become a participant, how long you have to work before you have a non-forfeitable interest in your pension, how long you can be away from your job before it might affect your benefit, and whether your spouse has a right to part of your pension in the event of your death. Most of the provisions of ERISA are effective for plan years beginning on or after January 1, 1975.

ERISA does not require any employer to establish a pension or welfare benefit plan. It only requires that those who establish plans must meet certain minimum standards. The law generally does not specify how much money a participant must be paid as a benefit.

ERISA does the following:

• Requires plans to provide participants with information about the plan including important information about plan features and funding. The plan must furnish some information regularly and automatically. Some is available free of charge, some is not.
• Sets minimum standards for participation, vesting, benefit accrual and funding. The law defines how long a person may be required to work before becoming eligible to participate in a plan, to accumulate benefits, and to have a non-forfeitable right to those benefits. The law also establishes detailed funding rules that require plan sponsors to provide adequate funding for their plans.
• Requires accountability of plan fiduciaries. ERISA generally defines a fiduciary as anyone who exercises discretionary authority or control over a plan's management or assets, including anyone who provides investment advice to the plan. Fiduciaries who do not follow the principles of conduct may be held responsible for restoring losses to the plan.
• Gives participants the right to sue for benefits and breaches of fiduciary duty.
• Guarantees payment of certain benefits if a defined plan is terminated, through a federally chartered corporation, known as the Pension Benefit Guaranty Corporation.
• Requires employers that offer health plans to provide a summary plan description (SPD) to its plan participants.

Employers may establish a defined contribution plan that is a cash or deferred arrangement, usually called a 401(k) plan. You can elect to defer receiving a portion of your salary which is instead contributed on your behalf, before taxes, to the 401(k) plan. Sometimes the employer may match your contributions.

There are special rules governing the operation of a 401(k) plan. For example, there is a dollar limit on the amount you may elect to defer each year. The amount may be adjusted annually by the Treasury Department to reflect changes in the cost of living. Other limits may apply to the amount that may be contributed on your behalf. For example, if you are highly compensated, you may be limited depending on the extent to which rank and file employees participate in the plan. Your employer must advise you of any limits that may apply to you.

Although a 401(k) plan is a retirement plan, you may be permitted access to funds in the plan before retirement. For example, if you are an active employee, your plan may allow you to borrow from the plan. Also, your plan may permit you to make a withdrawal on account of hardship, generally from the funds you contributed. The sponsor may want to encourage participation in the plan, but it cannot make your elective deferrals a condition for the receipt of other benefits, except for matching contributions.

The adoption of 401(k) plans by a state or local government or a tax-exempt organization is limited by law.

When rehiring a former employee, an employer may decide whether to give credit for prior service. In most cases, however, an employer must count a rehired employee’s previous service when determining eligibility to participate in a 401(k) or similar retirement plan.

Learn more about what to consider when rehiring an employee including: disregarding service, vesting, break in service, and joing the plan.

There is no federal or state law requiring that employers provide vacation time to their employees. However, this type of benefit is commonly used to help attract, motivate, and retain employees. Many states do, however, regulate vacation policies and may require notice to employees, may restrict "use it or lose it" policies, and may even require payout of vacation time upon termination.

A Health Savings Account (HSA) is an individual account used to save for future medical costs. Since it is an individual account, much like an IRA, it is totally portable and has no use-it-or-lose-it provisions like a 125 cafeteria plan. In order to open an HSA, the individual must be covered only by a high-deductible health plan. There are limits for contributions, but employees and employers may contribute. Distributions from the HSA must be for eligible medical costs..

Congress passed the landmark Consolidated Omnibus Budget Reconciliation Act health benefit provisions in 1986. The law amends the Employee Retirement Income Security Act, the Internal Revenue Code, and the Public Health Service Act to provide continuation of group health coverage that otherwise might be terminated.

COBRA contains provisions giving certain former employees, retirees, spouses, former spouses, and dependent children the right to temporary continuation of health coverage at group rates. This coverage, however, is only available when coverage is lost due to certain specific events. Group health coverage for COBRA participants is usually more expensive than health coverage for active employees, since usually the employer pays a part of the premium for active employees while COBRA participants generally pay the entire premium themselves. It is ordinarily less expensive, though, than individual health coverage.

Employers with 20 or more employees and group health plans are usually required to offer COBRA coverage and to notify their employees of the availability of such coverage. COBRA applies to plans maintained by private-sector employers and sponsored by most state and local governments.

COBRA establishes three specific criteria to qualify - plans, qualified beneficiaries, and qualifying events:

• Plan Coverage: Group health plans for employers with 20 or more employees on more than 50 percent of its typical business days in the previous calendar year are subject to COBRA. Both full- and part-time employees are counted to determine whether a plan is subject to COBRA. Each part-time employee counts as a fraction on an employee, with the fraction equal to the number of hours that the part-time employee worked divided by the hours an employee must work to be considered full-time.
• Qualified Beneficiaries: A qualified beneficiary generally is an individual covered by a group health plan on the day before a qualifying event who is either an employee, the employee's spouse, or an employee's dependent child. In certain cases, a retired employee, the retired employee's spouse, and the retired employee's dependent children may be qualified beneficiaries. In addition, any child born to or placed for adoption with a covered employee during the period of COBRA coverage is considered a qualified beneficiary. Agents, independent contractors, and directors who participate in the group health plan may also be qualified beneficiaries.
• Qualifying Events: "Qualifying events" are certain events that would cause an individual to lose health coverage. The type of qualifying event will determine who the qualified beneficiaries are and the amount of time that a plan must offer the health coverage to them under COBRA. A plan, at its discretion, may provide longer periods of continuation coverage.
• Qualifying events for employees are as follows:
• Voluntary or involuntary termination of employment for reasons other than "gross misconduct," and
• Reduction in the number of hours of employment.
• Qualifying events for spouses are as follows:
• Voluntary or involuntary termination of the covered employee's employment for any reason other than "gross misconduct,"
• Reduction in the hours worked by the covered employee,
• Covered employee's becoming entitled to Medicare,
• Divorce or legal separation of the covered employee, and
• Death of the covered employee.
• Qualifying events for dependent children are the same as for the spouse with one addition:
• Loss of "dependent child" status under the plan rules.

The law generally covers health plans maintained by private-sector employers with 20 or more employees, employee organizations, or state or local governments.

Employers must notify plan administrators of a qualifying event within 30 days after an employee's death, termination, reduced hours of employment, or entitlement to medicare.

A qualified beneficiary must notify the plan administrator of a qualifying event within 60 days after divorce or legal separation or a child's ceasing to be covered as a dependent under plan rules.

Plan participants and beneficiaries generally must be sent an election notice not later than 14 days after the plan administrator receives notice that a qualifying event has occurred. The individual then has 60 days to decide whether to elect COBRA continuation coverage. The person has 45 days after electing coverage to pay the initial premium.

Qualified beneficiaries must be offered group health coverage identical to that available to similarly situated beneficiaries who are not receiving COBRA coverage under the plan (generally, the same coverage that the qualified beneficiary had immediately before qualifying for continuation coverage). A change in the benefits under the plan for the active employees will also apply to qualified beneficiaries. Qualified beneficiaries must be allowed to make the same choices given to non-COBRA beneficiaries under the plan, such as during periods of open enrollment by the plan.

The Health Insurance Portability and Accountability Act of 1996 (HIPAA) amended the Employee Retirement Income Security Act to provide new rights and protections for participants and beneficiaries in group health plans. HIPAA contains protections both for health coverage offered in connection with employment ("group health plans") and for individual insurance policies sold by insurance companies ("individual policies").

HIPAA includes protections for coverage under group health plans that limit exclusions for preexisting conditions, prohibit discrimination against employees and dependents based on their health status, and allow a special opportunity to enroll in a new plan to individuals in certain circumstances.

HIPAA requirements for employers include the following:

• Limit exclusions for preexisting medical conditions (known as pre-existing conditions);
• Provide credit against maximum preexisting condition exclusion periods for prior health coverage and a process for providing certificates showing periods of prior coverage to a new group health plan or health insurance issuer ; and
• Provides rights that allow individuals to enroll for health coverage when they lose other health coverage, get married or add a new dependent; and
• Prohibit discrimination in enrollment and in premiums charged to employees and their dependents based on health status-related factors.

HIPAA also guarantees availability of health insurance coverage for small employers and renewability of health insurance coverage for both small and large employers.

States have the authority to provide greater protections than those available under federal law.

Employers, in their activities as employers (as opposed to health care plan sponsors), are not considered covered entities under HIPAA's privacy rules. However, the medical providers that perform the drug tests may be covered entities. The U.S. Department of Health and Human Services indicated that employers and service agents do not need to obtain written employee authorization to disclose drug testing information. However, if the entity performing the drug test is covered by the HIPAA privacy regulations, they may stipulate that authorization is required to disclose the information.

Covered entities may disclose information as necessary to comply with laws relating to workers' compensation or other similar programs.

While there is no definitive list of questions that cannot be asked, it is best to avoid questions that suggest a company may be taking illegal factors into consideration when hiring. Unless there is a legitimate business necessity, the following questions should not be asked:

• Are you married? What is your maiden name? Do you wish to be addressed as Mrs., Ms., or Miss? However, for the purposes of reference checking, the applicant may be asked if he/she has ever worked under a different name.
• Do you have children?
• Are you pregnant?
• Are you dating anyone right now? Personal question like this may give rise to claims of invasion of privacy or sexual harassment.
• How old are you? (It's okay to ask if an applicant is age 18 or older, since some jobs can't be performed by individuals under 18.)
• What is your nationality or race?
• Are you a citizen? (Instead, you can ask if an applicant is legally authorized to work in the U.S.)
• Have your wages ever been garnished or have you ever declared bankruptcy? Credit references may be used if in compliance with the Fair Credit Reporting Act of 1970 and the Consumer Credit Reporting Reform Act of 1996.
• Do you own your own home? This could be seen as discriminatory against minorities who are less likely to own their own home. Even questions like, "How long have you lived at this address?" may be discriminatory.
• What type of discharge did you receive from the military? An applicant may be asked what type of education, training, and work experience he/she received while in the military.
• Do you have a disability? A potential employer can ask whether the applicant can perform the essential functions of the job and meet attendance requirements with or without reasonable accommodation. Do not ask if they need some form of reasonable accommodation until after hiring.
• Have you ever undergone a psychiatric evaluation?
• How often do you drink alcoholic beverages or take illegal drugs? Frequency of use might reveal alcohol or drug addictions, which are considered disabilities.
• Have you ever filed a workers' compensation claim?
• Have you every filed a lawsuit or EEOC charge against an employer?
• What is your religion?
• Have you ever been a member of a union?
• What clubs, societies, and lodges do you belong to? Ask only about organizations that may be relevant to his or her ability to perform the job (for example, professional associations).
• What are your political affiliations?
• What's your sexual orientation?

This list is not exhaustive, but any of these questions or related questions used to get at the same information may open a company up to charges of discrimination. The best way to stay out of trouble with employment questions is to make sure every inquiry is job-related. If it is not, it should not be asked.

The Immigration and Nationality Act (INA) employment eligibility verification and related nondiscrimination provisions apply to all employers. The INA was created in 1952, bringing together many existing provisions of immigration law.

Under the Immigration Reform and Control Act of 1986 (IRCA), employers may hire only persons who may legally work in the United States (U.S.): citizens and nationals of the U.S. and aliens authorized to work in the U.S. The employer must verify the identity and employment eligibility of anyone to be hired, which includes completing and retaining the Employment Eligibility Verification Form (I-9). Employers must keep I-9s on file for at least 3 years (or one year after employment ends, whichever is later).

The INA also protects U.S. citizens and aliens authorized to accept employment in the U.S. from discrimination in hiring or discharge on the basis of national origin and citizenship status.

Affirmative action is the set of positive steps that employers use to promote equal employment opportunity and to eliminate discrimination. Affirmative action does not, however, require you to establish quotas, and in fact quotas are prohibited.

Regarding privacy in the workplace, employees may feel that the conversations they have with other employees or with customers may not be legally recorded, but this isn't the case.

Audio recording is generally allowed, but largely depends on state laws, which vary between one-party and two-party consent states.

While employers do not have to allow recordings in the workplace, both employees and employers can legally make audio recordings, though with varying degrees of consent required depending on state law.

Learn More.

Some of the statutes and regulations enforced by agencies within the Department of Labor require that notices be posted in the workplace. Generally, workplaces should post the following applicable notices:

• Fair Labor Standards Act (FLSA) - minimum wage,
• Job Safety and Health Protection (OSHA),
• Equal Employment Opportunity (EEOC),
• Family and Medical Leave Act (FMLA),
• Employee Polygraph Protection Act (EPPA), and
• Uniformed Services Employment and Reemployment Rights Act (USERRA).

• Title VII of the Civil Rights Act of 1964 (Title VII), which prohibits employment discrimination based on race, color, religion, sex, or national origin.
• The Lily Ledbetter Fair Pay Act (LLFPA), which prohibits pay discrimination on the basis of any protected class.
• The Equal Pay Act of 1963 (EPA), which protects men and women who perform substantially equal work in the same establishment from sex-based wage discrimination.
• The Age Discrimination in Employment Act (ADEA), which protects individuals who are 40 years of age or older.
• Title I of the ADA, which prohibits employment discrimination against qualified individuals with disability in the private sector.
• The Civil Rights Act of 1991, which among other things, provides monetary damages in cases of intentional employment discrimination.
• The Genetic Information Nondiscrimination Act (GINA), which prohibits discrimination based on genetic information.
• The Civil Rights Act of 1866, which originally prohibited discrimination in contracts, but which has been held to also prohibit race discrimination in employment.

The EEOC enforces all these laws. In addition, state agencies may provide coverage in other protected classes such as sexual orientation. Employees receive the benefit of the most comprehensive law.

Title VII, the ADA, and GINA cover all private employers that employ 15 or more individuals. These laws also cover private and public employment agencies, labor organizations, and joint labor management committees controlling apprenticeship and training.

The ADEA covers all private employers with 20 or more employees, employment agencies, and labor organizations.

The EPA covers all employers who are covered by the FLSA - virtually all employers are subject to the provisions of this Act.

State regulations may have more restrictive coverage. For example, in some states, sexual harassment laws apply to employers with as few as one employee.

The Equal Employment Opportunity Commission (EEOC) is an independent federal agency originally created by Congress in 1964 to enforce Title VII. The agency handles charges of discrimination based on age, disability, equal pay, national origin, pregnancy, race, religion, sex and genetic information, as well as sexual harassment. The EEOC maintains agreements with state civil rights agencies so that any complaint is filed with both agencies (State and EEOC).

A rule requiring employees to speak only English in the workplace at all times, including breaks and lunch time, will almost never be justified by business necessity and will probably violate Title VII of the Civil Rights Act. One exception might be an unusual work environment where safety considerations are of primary concern even during employee break times. Basically, you need to show a legitimate business reason for the English-only rule. Preferences of employees or clients cannot be a factor.