Human Resource Blog

Non-Profit Leadership and ERISA Terms

	Benefits
Total Compensation Summary Performance Improvement Plan Performance Appraisal and Review Employee Payroll Status/Change Form Employee Change Form

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	Management/Leadership
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	Workplace Management
Attendance Organizer for 2008, 2009, or 2010 Employee Warning Notice Employee Counseling Report Performance Improvement Plan Employee Performance Evaluation Form Employee Final Warning Notice Separation Checklist Harassment Prevention Kit

I was recently hired as the Executive Director of a small start-up non-profit in Virginia. I guess I’m the whole HR department and I don’t know much, so I hope you can help. Basically, in my hiring packaged (which was a letter), I was promised a 401K by the Chairman of the Board. Now, one year later, they are telling me that I cannot have the 401K. Is this legal? I had fully intended to fund it to the maximum every year and was waiting for them to set it up for me.

Tricky situation. First, The ERISA is the document in place to protect employee retirement. According to the ERISA, if you were promised something, you should be able to receive it. Employee welfare and pension programs, such as your 401K, are protected. The good news is that you have the offer in writing. The bad news is that the fund was never established (so it seems), so you have not made contributions.

ERISA protects employee pension benefit plans. However, you have to contribute to the plan in order to be protected from any losses or the cessation of the plan. As such, the 401K in question would likely fall under the employee welfare benefits category. As a welfare benefit, you were offered the 401K in writing and it should be upheld. However, the prosecutable part of your situation is determined by the structure of your organization.

If you, the executive director, governs the board, then you may be out of luck, as you are the supreme boss of the organization (and should set the plan up on your own.) However, it seems that the Chairman of the Board who hired you is one rung higher on the organizational latter. As such, he has authority over you and is held accountable and liable for the 401K offer.

Companies often run into similar problems when a manager promises an employee in writing or verbally that the employee will receive a certain benefit. Sometimes, companies have had to back up what the manager has offered, even if it is unfounded. Other times, the company overlooks what the manager offered. There is a very fine legal line here when a manager offers something that he or she has no authority to truly offer. That’s why organizations are forced to have tough training days with their leadership teams. Also, every organization should have documents in place in order to protect the benefits and the responsibility of the employers to guard those benefits. The ERISA, also, is a federal Act, so its jurisdiction is regardless of the state in which you reside.

You can certainly press your Chairman for the 401K, especially since it’s a promise in writing. Make sure that he or she knows that he or she is in violation of the ERISA when you are denied your 401K.