The Employee Retirement Income Security Act of 1974, commonly referred to as ERISA, is a comprehensive federal law that sets minimum standards for most voluntarily established retirement and health plans in private industry to provide protection for individuals in these plans. This Act was enacted to protect the interests of employees and their beneficiaries by requiring the disclosure of financial information about such plans, imposing standards of fiduciary responsibility upon those who manage and control plan assets, and establishing procedures for the resolution of benefit claims disputes (U.S. Department of Labor, 2020).
ERISA is enforced by the Department of Labor and is applicable to all private employers who offer retirement plans, including both defined benefit and defined contribution plans. Employee welfare benefit plans, such as group health plans, accident and disability plans, and death benefits, are also covered under ERISA. ERISA provides a minimum level of protection to plan participants and beneficiaries, such as requiring employers to provide certain disclosures to participants, and setting standards for how plan fiduciaries must manage their plans (U.S. Department of Labor, 2020).
Under ERISA, employers are required to provide certain disclosures to participants and beneficiaries. These disclosures include a Summary Plan Description (SPD), which must be provided to participants and beneficiaries, and must include information such as the plan’s name, purpose, and benefits; a description of a participant’s rights and obligations; and a description of the plan’s funding. In addition, employers are required to provide participants and beneficiaries with an annual statement regarding the plan’s financial condition (U.S. Department of Labor, 2020).
ERISA also sets standards for how plan fiduciaries must manage their plans. Fiduciaries must act solely in the interest of plan participants and beneficiaries, and must diversify plan investments to minimize the risk of large losses. Fiduciaries must also provide participants and beneficiaries with complete and accurate information about their plan and its investments. In addition, fiduciaries must ensure that plan assets are used solely for the benefit of participants and beneficiaries, and that plan expenses are reasonable and necessary (U.S. Department of Labor, 2020).
ERISA contains provisions that protect the rights of participants and beneficiaries in the event of a dispute. These provisions allow participants and beneficiaries to file a claim for benefits, appeal a denial of benefits, and bring a civil action if their claims are wrongfully denied. ERISA also provides for the establishment of a federal review process, called the Employee Benefits Security Administration (EBSA), to ensure that plans are in compliance with ERISA’s requirements (U.S. Department of Labor, 2020).
In conclusion, ERISA is a comprehensive federal law that sets minimum standards for most voluntarily established retirement and health plans in private industry. It is enforced by the Department of Labor and is applicable to all private employers who offer retirement plans, including both defined benefit and defined contribution plans. ERISA provides a minimum level of protection to plan participants and beneficiaries by requiring employers to provide certain disclosures to participants, setting standards for how plan fiduciaries must manage their plans, and providing for the resolution of benefit claims disputes.
References
U.S. Department of Labor. (2020). Employee Retirement Income Security Act of 1974 (ERISA). Retrieved from https://www.dol.gov/agencies/ebsa/about-ebsa/our-laws-and-regulations/erisa