what is the employee retirement income security act erisa 
the employee retirement income security act erisa is a federal law that protects the retirement assets of american workers the law outlines rules that qualified plans must follow to ensure that plan fiduciaries do not misuse plan assets it also covers certain health plans 1under the law plan administrators must regularly inform participants about the plan erisa is enforced by the employee benefits security administration ebsa a unit of the u s department of labor dol 2understanding the employee retirement income security act erisa erisa was established by the federal government in 1974 and holds fiduciaries responsible for their actions as they relate to the maintenance of certain employer sponsored retirement and health plans 4plans that fall under its mandate include defined benefit plans and defined contribution plans such as 401 k plans 403 b plans employee stock ownership plans esops and profit sharing plans 5 erisa also covers certain private sector health plans 4erisa addresses fiduciary provisions and bans the misuse of assets through these provisions 6 under erisa a fiduciary is anyone who exercises discretionary control or authority over plan management or plan assets including those who provide investment advice for the plan fiduciaries who do not follow the principles of conduct may be held responsible for restoring losses to the plan the law also sets minimum standards for participation vesting benefit accrual and funding 7 erisa also grants participants the right to sue for benefits and breaches of fiduciary duty according to ebsa to ensure that participants do not lose their retirement assets if a defined benefit pension plan is terminated or other circumstances such as company bankruptcy arise erisa guarantees payment of certain benefits through a federal agency known as the pension benefit guaranty corporation pbgc 87not every employer sponsored retirement plan is subject to the terms of erisa erisa does not cover plans set up or maintained by government entities and churches plans maintained outside the united states for nonresident employees are not covered by erisa either 4erisa and small businesseserisa rules can be complicated as such they may deter some small business owners from setting up retirement accounts for their employees there are alternatives that allow small businesses to sidestep some of erisa s complexity for example small businesses with 100 or fewer employees can offer simple iras to their employees this type of tax deferred retirement savings plan is covered by erisa and doesn t have the reporting and administrative burden that retirement plans such as 401 k s do 59employers must follow erisa rules that dictate which employees are eligible and how a company handles employee contributions they are also required to clearly spell out details of the plan s features with a summary plan description 10erisa and healthcareerisa provides protections to workers who participate in various healthcare plans 1112under the law plan administrators must keep participants updated about their plans including the law was amended with the passage of the affordable care act aca which mandated that employers with 50 or more workers offer healthcare coverage it capped out of pocket expenses and eliminated the denial of coverage due to preexisting conditions 14151617erisa regulation and standardsebsa administers and enforces erisa to ensure compliance with erisa plan administrators must follow plan document terms and make deposits and deferrals on time 18 they must also submit notices disclosures and forms to participants and update participants of any changes to the plan within mandated time frames 13plan administrators may choose to manage the paperwork on their own but if it proves to be too cumbersome they may hire a third party to do the work for them doing so however doesn t absolve the administrator from their fiduciary responsibility to their participants retirement accounts that qualify under erisa are generally protected from creditors bankruptcyproceedings and civil lawsuits 19history of the employee retirement income security act erisa erisa is the culmination of a series of laws that attempted to regulate pension plans the impetus was a growing wave of public concern in the 1960s and 1970s that funds of private pension plans were being mismanaged and abused 20 take for example the teamsters central states pension fund which had a history of questionable loans to sources with ties to las vegas casinos and real estate developments 2122 and in 1963 when studebaker closed its indiana factory more than 4 000 auto workers lost some or all of their pension plan benefits 2324erisa was signed into law on september 2 1974 by president gerald ford who said it may finally give the american worker solid protection in his pension plan 25the law has gone through several changes since it was first enacted for instance lawmakers approved an amendment that lengthened the time a worker is allowed to be away from work before they lose out on their plan s vesting period erisa has also since created a process where during divorce proceedings a spouse may claim access to a participant s retirement benefits via a qualified domestic relations order qdro the law has also modified healthcare 20 for example cobra which was passed in 1985 ensured the continuation of health insurance coverage after an individual s employment situation changes 2026who is eligible for erisa erisa is very broad it applies to essentially anyone with a qualified plan who works for a partnership limited liability company s corporation c corporation or nonprofit organization it even covers businesses with only one employee however governmental and religious organizations aren t typically covered and plans that operate outside the united states primarily for the benefit of nonresident employees aren t covered 27