• ERISA establishes standards and requirements for employer pension plans in the private sector.

The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that regulates pension plans and welfare benefit plans in the private industry. It pre-empts state laws that relate to employee benefit plans. For example, if organizations maintain a pension plan, ERISA specifies when employees must be allowed to become a participant, how long employees must work before earning a non-forfeitable interest in their pension, how long they can be away from their jobs before it might affect their benefits, and whether their spouses have a right to part of their pensions in the event of their deaths. 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 do establish plans meet certain minimum standards. The law generally does not specify how much money a participant must be paid as a benefit.

Background

The goal of Title I is to protect the interests of participants and their beneficiaries in employee benefit plans. Among other things, ERISA requires that sponsors of private employee benefit plans provide participants and beneficiaries with adequate information regarding their plans. Also, individuals who manage plans (and other fiduciaries) must meet certain standards of conduct, derived from the common law of trusts and made applicable (with certain modifications) to all fiduciaries. The law also contains detailed provisions for reporting to the government and disclosure to participants. Furthermore, there are civil enforcement provisions aimed at assuring that plan funds are protected and that participants who qualify receive their benefits.

Coverage

ERISA covers pension plans and welfare benefit plans (e.g., employment based medical and hospitalization benefits, apprenticeship plans, and other plans described in Section 3(1) of Title I). Plan sponsors must design and administer their plans in accordance with ERISA. Title II of ERISA contains standards that must be met by employee pension benefit plans in order to qualify for favorable tax treatment. Noncompliance with these tax qualification requirements of ERISA may result in disqualification of a plan and/or other penalties.

Form 5500

The Internal Revenue Service (IRS), DOL, and Pension Benefit Guaranty Corporation developed the Form 5500-series returns for employee benefit plans to satisfy annual reporting requirements under ERISA and the Internal Revenue Code (IRC). Plan sponsors must generally file the return on the last day of the seventh month after their plan years end.