The information contained in the following pages answers the most common questions about retirement plans. Keep in mind, however, that this article is a simplified summary of participant rights and responsibilities, not a legal interpretation of ERISA.

ERISA and Your Retirement Plan

This section explains the purpose of the Employee Retirement Income Security Act, what it covers, and what is excluded from its coverage. It tells which plans are exempt from the law and who administers ERISA. The following questions are addressed:

• What is the Employee Retirement Income Security Act?
• What retirement plans are covered by ERISA?
• How does the law protect a plan's assets?
• What are SEPs, SIMPLEs, profit-sharing plans, and stock bonus plans?
• What are 401(k) and ESOPs plans?
• What is the role of Federal agencies?

What Is ERISA?

The Employee Retirement Income Security Act of 1974 (ERISA) is a Federal law that sets minimum standards for retirement plans in private industry. For example, if your employer maintains a plan, ERISA specifies when you must be allowed to become a participant, how long you have to work before you have a nonforfeitable interest in your benefit, 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 benefit in 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 retirement 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 nonforfeitable 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 of 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 benefit plan is terminated, through a federally chartered corporation, known as the Pension Benefit Guaranty Corporation.