ERISA, short for the Employee Retirement Income Security Act, is a comprehensive federal law enacted in the United States in 1974 to protect the interests of participants in employee benefit plans (retirement, health, and welfare) offered by private sector employers. The act was introduced to establish minimum standards for voluntarily established pension and health plans in order to ensure the financial stability of these plans and safeguard the benefits that employees are entitled to.
Under ERISA, private employers are required to provide their employees with specific information about the plan, including its funding, eligibility requirements, and benefits accrual. The act also mandates employers to act as fiduciaries, meaning they must manage these plans diligently and solely in the best interest of the plan participants and beneficiaries.
ERISA lays out certain disclosure and reporting requirements, ensuring that employees receive regular communication about their plan's status and any changes made to it. Furthermore, the act created the Pension Benefit Guaranty Corporation (PBGC), a federal agency responsible for insuring certain private sector pension benefits if a plan fails to meet its obligations.
By implementing ERISA, the government aimed to enhance the security and level of protection surrounding employee benefit plans, providing employees with more confidence and assurance in their retirement and healthcare benefits. ERISA also established a framework for addressing potential disputes and claims related to these plans, giving participants the right to sue employers or plan administrators for perceived breaches of fiduciary duty.
In summary, ERISA is a federal law in the United States that sets regulatory standards for employee benefit plans, mandates disclosure and reporting requirements, and establishes rules for fiduciaries managing these plans to protect the interests of participants and beneficiaries.
