ERISA 101

How the Employee Retirement Income Security Act Protects You

ERISA 101
August 17, 2015

The Employee Retirement Income Security Act (ERISA) was enacted in 1974 primarily to set standards for private pension programs. Prior to ERISA, the management of some large pension funds had been indulging in questionable investments and loans. ERISA was enacted to make sure that pensioners get the benefits that they deserve from their fund contributions.

ERISA's protections do not apply just to pensions, but also to other benefit programs and welfare plans that are provided by employers. These welfare plans include employer-sponsored health plans, vacation policies, required training, employer-sponsored day care, and other benefits that are voluntarily provided by employers.

Voluntary is the key word. ERISA does not require employers to offer any benefits — but any employer who chooses to offer them must follow the ERISA guidelines for administering these benefits. This keeps potential employers from misrepresenting benefits to you or modifying benefits below minimum threshold limits.

ERISA applies only to private employers. Governmental programs and programs for religious-based organizations are exempt.

The areas of protection are summarized below.

  • Plan Information – You must be given a written plan that includes all necessary information about the features of your benefits plan and the funding associated with it. Employers are responsible for supplying this plan, known as a Summary Plan Description, to all employees.

    The plan information must include an overview of the plan's features and funding structure; the standards and qualification rules for participation, vesting, and the accrual of benefits; the management and control of the collective benefits; and the methods to address grievances including the rights to sue for breaches of benefits.

  • Access/Non-Discrimination – If a benefit program exists and you meet eligibility requirements, you must be offered access to it as long as you are over 21 years old and have worked there for at least one year (employers may offer the benefits earlier, but not later).

  • Fiduciary Responsibility – Under ERISA, your employer has a fiduciary responsibility to manage and distribute your funds properly. Mismanagement of the pension funds can result in prosecution.

    The Supreme Court ruled in a recent case (Tibble v Edison International) that employers have a continuing fiduciary duty through the life of the plan — in other words, employers cannot just set up a proper initial investment and ignore the results as things change over time.

  • Reserve Funding – In case a defined benefit plan is terminated, the Pension Benefit Guaranty Corporation (PBGC) steps in to cover the benefits. PBGC is funded by a pool provided by sponsors of defined-benefit plans (not through tax dollars).

  • Wrongful Termination – You cannot be fired simply to prevent eligibility for benefit plans.
  • Compliance with ERISA is monitored through required reports with regulatory agencies. Violations can result in fines from the Department of Labor (DOL), as well as potential civil lawsuits and even criminal charges.

    ERISA has been amended many times over the years, with important amendments related to health benefits. The Consolidated Omnibus Budget Reconciliation Act (COBRA) allows workers and families the right to extend their employer-based health coverage for a period of time after a job loss or other certain events. The Affordable Care Act (ACA) provides a private alternative now, but COBRA is still available for those transitioning between jobs. Meanwhile, the Health Insurance Portability and Accountability Act (HIPAA) is aimed at preventing discrimination against health coverage for those with pre-existing medical conditions and other health-related factors.

    Other amendments include the Newborn's and Mothers' Health Protection Act and the Mental Health Parity Act. You can find a basic description of ERISA and links to these amendments and other subtopics on the DOL website

    As a worker, you should know your rights under ERISA. If an employer is violating ERISA, whether by ignorance or by intent, you need to understand how you are being deprived of benefits and what you can do about the situation.


    Photo ©iStock.com/zimmytws

  Conversation   |   27 Comments

Add a Comment

By submitting you agree to our Terms of Service
Irene | 08.17.15 @ 15:18
Good information to have.
Alec | 08.17.15 @ 15:38
This is good information to have. I wasn't aware that this existed. Is it similar to a 401k and health insurance rolled in to one? Is it still around? I saw mentioned that plans under the AHA have replaced most plans like this for public and private businesses but did this one grandfather in as an accepted plan?
Beverly | 08.17.15 @ 15:54
Good information to know. I've never had a job with a pension, but if I ever do I'll be better equipped with knowledge of it. Glad there are some rules in force. Too bad you can't just trust people to do the right thing so that we actually need these regulations.
Elaine | 08.17.15 @ 16:03
Glad I got to read this information because if I do ever decide to go back into the workforce I will be more knowledgable of this options. Very informative article.
Daniel Dohlstrom | 08.17.15 @ 16:17
ERISA sounds to me like something more people need to know about, I was not aware and I am sure there are many that were not as well. Things like this show why it is mpre than a little helpful to have professionals on your side.
Angie | 08.17.15 @ 16:28
There are fewer and fewer jobs offering a pension as a benefit, as there are fewer companies who offer many full-time positions. They are able to staff more cheaply by hiring primarily part-time employees who don't receive the same type of benefits as full-time employees have. It's tough both ways...
Christina | 08.17.15 @ 16:29
You would think this information would be more readily available - I had never heard of it prior to this article. Glad to have the information!
Crystal | 08.17.15 @ 16:34
Great info! I'm investigating more after reading this.
Sandy | 08.17.15 @ 16:34
Very good information to know.
Erin | 08.17.15 @ 16:44
I never knew about this. I am not in the work force, but it is good information to have around just in case.
Britt | 08.17.15 @ 17:01
I think having this sort of thing is good and much needed when it comes to having proper protection.
Britt | 08.17.15 @ 17:02
I find this to be something that is very beneficial for people when it comes to money and investing .
Sara | 08.17.15 @ 17:23
Was not aware this existed. Great info to have on hand.
Sarah | 08.17.15 @ 17:26
I've never heard of this before. This is a very informative article about it. Very good information for those who work. The more you know...
gracie | 08.17.15 @ 17:32
This was a really helpful article that laid things out so that they were easy to take a look at and understand. There were several things mentioned here that I was not aware of or hadn't really understood. Thanks for the great info!
Katie Greene | 08.17.15 @ 18:15
Its nice to see they can't fire to avoid benefit payment. My husband worked for a company previously that would work them right up until they had to pay benefits, then cut hours down so they were no longer eligible. They also fired to avoid payment of earned benefits
trish | 08.17.15 @ 18:18
I have bookmarked this page and will be sharing with all my working friends, and also for me to refer back to when I reenter the workforce!
Zanna | 08.17.15 @ 18:29
Are there any companies still offering a Pension plan? I think the COBRA amendment may be one of the few things that most people would find useful, as so many companies have opted to use 401k plans instead of true retirement / pension plans.
Meredith L | 08.17.15 @ 18:39
Maybe I've never heard of ERISA because it doesn't sound easy. Why would private companies jump through hoops for this when it doesn't seem to directly benefit them (the company) in the long run? Obviously, it sounds like a program that would help the employees in the long run, but a company won't look at it unless it somehow helps their bottom line. That's just my observation.
Nancy | 08.17.15 @ 19:01
I had never heard of this before reading this article. It's good to know that these protections are in place.
Apryl | 08.17.15 @ 19:29
Actually been worried about this. Very good to know!
Steffanie | 08.17.15 @ 20:43
Great information. My husband is self employed, so we don't have to worry about an employer.
Britt | 08.17.15 @ 21:08
I think this is without a doubt great information to have, as it is beneficial for all parties involved, especially the customer.
Victor | 08.17.15 @ 21:08
Great article, bring more
Jane | 08.17.15 @ 21:20
I don't think all companies abide by ERISA though, even though they should.
Andrea | 08.17.15 @ 21:55
Useful information. Really need to research my options.
Kamie | 08.17.15 @ 23:37
It is great to know all the things that ERISA is applicable with. So much great information available.
$commenter.renderDisplayableName() | 12.03.16 @ 10:00
{comment}

  Our Professionals Are Available to Help!

  Can't find What You're Looking For?