To protect employee pension plans, the U.S. government enacted the Employee Retirement Income Security Act, also known as ERISA, in 1974. The legislation places a heavy burden on employers while conferring rights to employees. These are the top three things everyone should know about ERISA.
Covers Private Sector Employees
Although they may offer employee benefits, ERISA does not apply to the public sector or to churches which provide healthcare or retirement benefits for their employees. Private sector employers, however, are subject to the duties outlined in the act.
Carries Fiduciary Responsibilities
Company representatives who are paid to provide investment advice, who administer policies, or who have any other responsibility or authority over the plans have fiduciary responsibilities. This means that they are also subject to legal action, meaning many companies must provide fiduciary insurance coverage for those employees.
Supersedes State Laws
As with other federal legislation, ERISA supersedes many state and local laws, except where specifically exempted. It’s important for employers to know the rights, benefits, and responsibilities of employee benefit plans, and it is equally vital that a company representative educate employees and answer questions about the plans. This will reduce the likelihood that employees file complaints.
Employee benefit plans are highly regulated. Although it is sometimes onerous for companies to comply with, ERISA ensures employee plans are properly administered and protected.