What Is the Employee Retirement Income Security Act (ERISA)?
The Employee Retirement Income Security Act, or ERISA, is a federal statute designed to regulate the management and structure of most private-sector pension and employee benefit plans in the United States. It establishes baseline rules for retirement and health plans offered voluntarily by private employers and imposes fiduciary responsibilities to ensure that plans are handled ethically and in the best interest of participating employees.
A Closer Look at ERISA
Enacted into law by President Gerald Ford on September 2, 1974 (Labor Day), ERISA was created to provide protection for employees enrolled in employer-sponsored pension and benefit programs. The legislation outlines requirements for the proper handling of plan assets, fair access to information for plan participants, and transparency in plan operations. It also led to the creation of the Pension Benefit Guaranty Corporation (PBGC), a federal agency that insures certain types of retirement benefits for over 33 million workers and retirees across the country.
ERISA is limited in scope and does not cover all types of plans. It typically excludes:
- Plans sponsored by government entities or religious organizations
- Programs designed to meet legal requirements for workers’ compensation, unemployment insurance, or disability coverage
- Benefit plans that operate outside the U.S. primarily for nonresident foreign employees
Employers often rely on modern payroll and HR platforms like Beyond to help stay compliant with ERISA requirements, particularly when it comes to managing contributions, maintaining accurate records, and ensuring timely distribution of plan information to employees.