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This Minnesota Human Resources Manual is offered to you for free. Find state specific laws and regulations below.

Benefits — Minnesota


When Congress enacted the Employee Retirement Income Security Act (ERISA) in 1974, it wanted to balance two competing concerns:

  1. protecting employees who had been promised certain benefits by their employers
  2. giving employers a set of rules by which they could operate and maintain uniform employee benefit plans for numerous facilities without interference from varying state laws.

Therefore, while providing plan participants with certain causes of action to sue their employers in federal court if they are not provided the benefits they were promised, and imposing certain disclosure obligations on employers that maintain “employee benefit plans” (as defined in the law), ERISA also provides nearly exclusive regulation of such plans. ERISA preempts state laws that attempt to regulate employee benefit plans, except for generally applicable criminal laws and certain laws that regulate insurance. As such, any claim that an employee may bring that relates to an employee benefit plan (other than the exceptions noted in this chapter), such as a claim for benefits or for breach of fiduciary duty, must be brought under ERISA.

Employee benefit plans

ERISA defines an “employee benefit plan” as either an “employee welfare benefit plan” or an “employee pension benefit plan.” An employee benefit plan does not include the following:

  • governmental plans
  • church plans
  • plans intended solely to comply with state laws (such as workers' compensation, unemployment compensation, disability, etc.)
  • plans maintained outside the United States substantially for nonresident aliens
  • excess benefit plans (plans maintained solely for the purpose of providing benefits for certain employees in excess of the limitations on contributions and benefits imposed by the Internal Revenue Code and ERISA)
  • certain payroll practices (for example, vacation policies that do not have administrative schemes).

Employee welfare benefit plan

An employee welfare benefit plan is a plan, fund, or program that is established by an employer for the purpose of providing certain benefits to employees and/or their beneficiaries. The following plans are examples of plans maintained by an employer for the benefit of its employees or their beneficiaries:

  • health plans
  • life insurance plans
  • disability plans
  • accidental death and dismemberment benefit plans
  • certain scholarship plans
  • certain pre-paid legal service plans
  • severance plans
  • on-site daycare centers
  • the buying and selling of vacation days.

Employee pension benefit plans

An employee pension benefit plan is a plan, fund, or program that provides retirement income to employees or their beneficiaries, or results in a deferral of income by employees extending to the termination of employment or beyond. These plans include:

  • Defined benefit pension plans - These plans generally determine a participant’s retirement benefit based on a specified formula. For example, it may calculate a benefit through a plan formula that considers such factors as salary and length of service. Common defined benefit plans are traditional retirement plans and cash balance plans. Under these plans, the employer maintains the risk of loss from the plan’s investments.
  • Defined contribution plans - Unlike a defined benefit plan, a defined contribution plan does not promise a specific amount of benefits at retirement. Instead, these plans provide participants with an individual account to which the employee, the employer, or both make contributions. The employer may invest the assets of the plans, but more typically, the employer gives participants the right to determine the investment options. Typical defined contribution plans include profit sharing plans, 401(k) plans, money purchase plans, and employee stock ownership plans (ESOPs).


ERISA imposes certain obligations on employers that sponsor an employee benefit plan, including:

  • complying with funding rules applicable to certain plans
  • disclosing information to participants and beneficiaries
  • reporting certain information concerning the plans to governmental authorities
  • operating the plans according to their fiduciary duties.

In addition, ERISA requires that employee benefit plans contain a number of specific provisions. These obligations are discussed herein.

Funding obligations

Plan sponsors have the obligation to fund certain employee benefit plans. Employee pension benefit plan assets must be held in trust for the benefit of the participants and beneficiaries in order to pay the benefits when they come due. An informal promise to pay an employee when the employee retires may subject the employer to ERISA’s funding requirements as well as other ERISA requirements. In addition, retirement plans must meet minimum funding levels to pay participants or their beneficiaries the retirement benefits promised to them under the plan. Most welfare benefit plans are not subject to ERISA’s funding requirements, although ERISA requires that assets intended to fund benefits must be contained in trust. A limited exception from this requirement exists for payroll withholding used to pay insurance premiums.

Disclosure obligations

All plans subject to ERISA must be in writing. An employee benefit plan that is not in writing (such as an informal promise to pay retirement benefits) still is subject to ERISA. ERISA requires the plan sponsor to maintain a plan document and to explain the plan to participants in a summary plan description. A summary plan description is generally a summary of the plan and must be drafted in a manner calculated to be understood by the average plan participant. Summary plan descriptions must also contain certain provisions, including a statement of ERISA rights and claims review procedures. 

However, summary plan descriptions are more than a summary of plan terms. They are typically the only document a participant receives that describes the benefits, and some courts have determined that a participant can sue based on the terms of the summary plan description, even if the terms conflict with the plan document. For this reason, great care should be taken in drafting summary plan descriptions.

If a participant requests documents used by the employer to operate the plan, the requested documents must be provided within 30 days of the participant’s request. Failure to provide the documents within this time period could result in a fine of up to $120 per day.

Reporting obligations

Most ERISA plans are required to file an annual report on Form 5500. Excepted from this filing requirement are unfunded or fully-insured plans (or a combination) with fewer than 100 participants. Failure to file a Form 5500 could result in the imposition of a civil penalty of up to $2,259 per day. There are exceptions to the filing requirements for certain small welfare plans funded through insurance or from the general assets of the employer. A copy of the Form 5500 is available at:

Fiduciary duty

Under ERISA, any individual who exercises discretion in the administration of an employee benefit plan or the assets of the plan is a fiduciary and must comply with the statute’s fiduciary responsibility provisions. Fiduciaries must perform their duties solely in the interests of the participants and beneficiaries, and they can be personally liable for losses to a plan.

Employee rights

ERISA gives participants or beneficiaries the right to sue the employer or the plan for benefits due to them under the plan’s terms and for penalties for the plan administrator’s failure to provide requested documents. Participants may also sue for breach of fiduciary duty. Most lawsuits under ERISA must be brought in federal court, unless the suit involves a claim for benefits (which may be brought in state court). ERISA does not specifically give a participant a right to a jury trial. Consequently, most cases are decided by a judge.

Most of the requirements for employee benefit plans are governed by the Internal Revenue Code and other federal laws. Aside from the tax consequences for failure to comply with the Code, ERISA imposes certain requirements that, if not complied with, could create a cause of action against the plan, employer, and/or fiduciaries. These additional ERISA-imposed requirements include:

  • minimum participation (generally, a maximum two-year waiting period)
  • a legal entitlement to receive benefits, known as vesting (generally after no longer than six years of coverage under the plan) and funding requirements for pension plans
  • COBRA and HIPAA requirements for most group health plans. See also Health insurance continuation coverage and Health insurance portability and privacy.

Insured welfare benefit plans must also comply with state insurance laws.

Furthermore, an important provision of ERISA is that pension benefits may not be assigned or transferred other than to the participant or a beneficiary. The exceptions to this rule are if the Internal Revenue Services (IRS) garnishes the plan account or a qualified domestic relations order (QDRO) is submitted. Not all state court divorce orders that award pension benefits to the nonparticipating spouse meet the QDRO requirements and, until these orders are revised to meet the requirements, a distribution should not be allowed. Only state court orders that comply with the IRS rules will allow such a distribution. Generally, in order to be a QDRO, the domestic relations order must be a judgment from a court, signed by a judge, which relates to child support, alimony payments or marital property rights under state domestic relations law. Furthermore, it must specify certain things, including:

  • the name of the plan to which the order relates
  • the number of payments or period to which the order applies
  • the amount or percentage of the participant’s benefit to which the payee is entitled
  • other various requirements.

Also, the order cannot require the plan to make payments in a form or a manner for which the plan does not provide. It is important that employers be sure that court orders specifically comply with the QDRO rules before allowing a distribution from a qualified pension plan. Department of Labor regulations also provide that a domestic relations order will not fail to be treated as qualified solely because of the time at which it is issued. Examples are:

  • after the death of the participant, even if no notice was provided to the plan before the participant’s death
  • after the parties’ divorce
  • after the participant’s annuity starting date.

An order revising an earlier QDRO may still be valid if it involves the same participant and a different alternate payee.

Remember, for ERISA purposes and regulations, the Department of Labor construes “spouse” or “marriage” under ERISA and related Department regulations to include legally married same-sex couples, even if they are domiciled in a state that does not recognize such marriages.

Same-sex marriages

In 2013, the U.S. Supreme Court held that the provision of federal law that prohibited the federal government from recognizing same-sex marriages was unconstitutional and unenforceable. In 2015, the Court also ruled that state-level bans on same-sex marriage were unconstitutional. Therefore, same-sex couples may legally marry and must be treated on the same basis as other married persons for all purposes by both Minnesota and the federal government.

Employers should ensure that their benefit plan documents, summary plan descriptions, and payroll practices comply with these Supreme Court decisions.

Where to go for more information

This chapter is intended as a brief overview of some of the requirements and obligations ERISA and the ACA impose on employers. It is by no means exhaustive. If you need more information about ERISA, you may wish to consult an ERISA attorney or visit: