Department of Labor DOL. Among other things, ERISA imposes minimum standards for employer-sponsored health insurance, including documentation, reporting, and fiduciary requirements. With limited exceptions, ERISA applies to health insurance plans established by private-sector employers for their employees, regardless of the states where they operate. If your employer declares bankruptcy , your retirement savings are not at risk and your creditors cannot make a claim against funds held in your retirement account if you owe them money.
Regardless of their intentions, workers may see changes in certain employer-sponsored accounts. Some of the issues have traditionally revolved around a lack of protection for workers with the administration of large pension plans. For instance, more than 4, workers lost some or all of their pension plan benefits when Studebaker-Packard closed its Indiana factory in These benefits were shuttered because the plan was underfunded.
The Teamsters' Central States Pension Fund brought the issue of fiduciary malfeasance related to retirement accounts into the public eye in the s. This fund already had a history involving questionable loans to Las Vegas casinos. These are just two examples that show the irregularities that ERISA proposed to address when it was first enacted. The U. House of Representatives passed the law in February and was sent to the Senate, where it was approved the following month.
The law increased the responsibility of EBSA and has gone through several changes since it was first enacted. For instance, lawmakers approved amendments to reduce the age limit required by employers for retirement plan participation, as well as expanding the total time a worker is allowed to be away from work before they lose out on their plan's vesting period.
The COBRA program was added in , which entitles the continuation of health insurance coverage after an individual's employment situation changes. The main purpose of ERISA is to protect the interests of workers who participate in employee benefit plans, including certain retirement and healthcare plans.
Protections extend to retirees as well as plan beneficiaries. ERISA regulates plan administrators and sponsors to ensure they provide plan information to their participants and remain compliant with their fiduciary duties. Plans that are covered under ERISA include employer-sponsored retirement plans, such as k s, pensions, deferred compensation plans, and profit-sharing plans.
Plans can be either defined benefit contribution or defined contribution plans. ERISA applies to anyone who works for a partnership, limited liability company, S-corporation, C-corporation, nonprofit organization, and even businesses with only one employee.
Churches, religious organizations, and plans that operate outside the United States aren't covered. Plans that fall in this category include mandatory plans, plans that receive employer contributions, as well as plans that outline how funds are to be administered. Anyone who has discretionary authority or control of certain employer-sponsored retirement or healthcare plans, or anyone who provides investment advice on the direction of these assets is considered a fiduciary. This includes trustees, plan administrators, and investment committees.
Employers aren't generally included in the list of fiduciaries. ERISA violations occur when a fiduciary doesn't live up to their responsibility. For instance, a plan administrator who doesn't provide full disclosure about fees and plan benefits commits a violation.
Someone who fails to send updated information about plans to participants, including statements, disclosures, and notices. Department of Labor. Accessed Oct. Internal Revenue Service. Pension Benefit Guaranty Corporation. Chicago Tribune. Retirement Planning. Retirement Savings Accounts. Life Insurance. Your Privacy Rights. To change or withdraw your consent choices for Investopedia. At any time, you can update your settings through the "EU Privacy" link at the bottom of any page.
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