Q: What is ERISA?

The Employee Retirement Income Security Act of 1974, or ERISA, protects the assets of millions of Americans so that funds placed in retirement plans during their working lives will be there when they retire.

ERISA is a federal law that sets minimum standards for pension plans in private industry.  For example, if your employer maintains a pension plan, ERISA specifies when you must be allowed to become a participant, how long you have to work before you have a non-forfeitable interest in your pension, how long you can be away from your job before it might affect your benefit, and whether your spouse has a right to part of your pension in the event of your death.  Most of the provisions of ERISA are effective for plan years beginning on or after January 1, 1975.

ERISA does not require any employer to establish a pension plan.  It only requires that those who establish plans must meet certain minimum standards.  The law generally does not specify how much money a participant must be paid as a benefit.

ERISA does the following:

• Requires plans to provide participants with information about the plan including important information about plan features and funding.  The plan must furnish some information regularly and automatically.  Some is available free of charge, some is not.

• Sets minimum standards for participation, vesting, benefit accrual and funding.  The law defines how long a person may be required to work before becoming eligible to participate in a plan, to accumulate benefits, and to have a non-forfeitable right to those benefits.  The law also establishes detailed funding rules that require plan sponsors to provide adequate funding for your plan.

• Requires accountability of plan fiduciaries.  ERISA generally defines a fiduciary as anyone who exercises discretionary authority or control over a plan's management or assets, including anyone who provides investment advice to the plan.  Fiduciaries who do not follow the principles of conduct may be held responsible for restoring losses to the plan.

• Gives participants the right to sue for benefits and breaches of fiduciary duty.

• Guarantees payment of certain benefits if a defined plan is terminated, through a federally chartered corporation, known as the Pension Benefit Guaranty Corporation.