The turmoil in the financial markets is certain to result in the loss of many thousands of jobs. The people who hold those jobs undoubtedly enjoy a variety of employee benefits, and some or maybe most of those benefits will be lost along with the jobs. Whatever happens, it’s important to remember that there is substantial regulation of benefits by the Employee Retirement Income Security Act of 1974, known as ERISA, as well as by numerous provisions of the Internal Revenue Code. ERISA and the Code provide rules that must be complied with, and they offer protections for both employees and employers.

ERISA details the rights that employees have to know what their benefits are and what recourse they have if those benefits are lost. ERISA also limits rights, and gives employers the ability to change or eliminate benefits under some circumstances. There are many thousands of lawsuits that have been brought under ERISA, and many of them could have been avoided if one or both parties had simply followed the ERISA rules in claiming or reducing benefits. Here are a couple of examples:

If an employee was covered by health insurance, a law called COBRA contains provisions added to the Internal Revenue Code, permitting a continuation of health coverage for specific periods of time, but at the employee’s expense. If the employer goes out of business and no longer has a health plan, the COBRA rights could be lost.

Many of these employees will have retirement plan accounts. ERISA and the Code describe an employee’s rights to those benefits once employment has ended, and also permit employers to limit those rights to those set forth in the law. If an employee is only partially vested in benefits, the unvested portion may revert to the plan and benefit other employees. It’s important for employers to explain fully the rights that employees have, to avoid accusations by the employees that they were misled.

Employees may have continuation rights in other benefits, such as the right to convert life insurance policies provided by the employer to their personal ownership, or the right to continue disability income coverage.

Employees who have lost or expect to lose their jobs need to examine the documentation of their employee benefits and see what they may retain or continue. Employers need to understand the rights they have to change or eliminate those benefits, as well as their obligations to advise employees of their rights. If both sides know and comply with the law, the process of terminating employment, while still an unfortunate occurrence, will at least be carried out fairly.