ERISA: Employee Retirement Income Security Act

A comprehensive act that establishes minimum standards for pension and health plans in private industry to provide protection for individuals in these plans.

The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for most voluntarily established pension and health plans in private industry. These standards are designed to protect individuals participating in these plans.

Overview of ERISA

Key Provisions

ERISA requires plans to:

• Provide participants with plan information, including important information about plan features and funding.
• Establish fiduciary responsibilities for those who manage and control plan assets.
• Require plans to establish a grievance and appeals process for participants to get benefits from their plans.
• Give participants the right to sue for benefits and breaches of fiduciary duty.

Types of Plans Covered

ERISA applies to retirement plans (such as defined benefit plans and defined contribution plans) as well as welfare benefit plans (such as health insurance, life insurance, and disability insurance).

Fiduciary Responsibilities

Individuals who manage and control plan assets must act in the best interests of the participants. ERISA outlines specific fiduciary duties and prohibits conflicts of interest.

Plan Information and Reporting

ERISA mandates that plans must regularly provide participants with information about their benefits, including plan rules, financial information, and documents on the operation and management.

Historical Context

ERISA was enacted in response to mismanagement and abuse of private pension plan funds. It was signed into law by President Gerald Ford on September 2, 1974. The legislation aimed to ensure that employees would receive the pension and other benefits promised by their employers.

Applicability

ERISA applies to employers in private industry. Governmental employers and churches are generally exempt from coverage, as are plans established primarily for the benefit of self-employed individuals.

Comparisons and Related Terms

ERISA vs. PPA

The Pension Protection Act (PPA) of 2006 amended ERISA to provide additional protections for pension plan beneficiaries and imposed new funding requirements on pension plans.

ERISA vs. IRA

While ERISA applies to employer-sponsored retirement plans, Individual Retirement Accounts (IRAs) are personally managed and do not fall under ERISA regulations.

FAQs

What is a fiduciary under ERISA?

A fiduciary is anyone who exercises discretionary control or authority over plan management or plan assets, including anyone who gives investment advice to the plan.

What benefits does ERISA protect?

ERISA protects pension benefits, health benefits, disability benefits, and more, ensuring they are managed with participants’ best interests in mind.

How does ERISA affect health plans?

ERISA sets standards for health plans in private industry, ensuring plans provide certain information and have procedures for grievances and appeals.

References

• U.S. Department of Labor: ERISA Overview
• The Pension Rights Center: ERISA Basics

Summary

ERISA is a critical piece of legislation that protects the retirement and health benefits of American workers. By setting standards for plan information, fiduciary duties, and participant rights, it ensures that benefits are managed prudently and fairly. Understanding ERISA is essential for those involved in managing or participating in employee benefit plans.