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Employee Retirement Security Act
The Employee Retirement Security Act, known more popularly by its acronym ERISA, is a federal law passed in 1974. It was enacted with the purpose of setting up minimum standards for pension plans in the private sector. The outstanding feature of the Employee Retirement Security Act is that while it does not require an employer to compulsorily set up a pension plan for his employees; those who set one up are bound to follow the rules set out in this Act.
Closely related to the first of the features mentioned above; Employee Retirement Security Act does not require a stipulated sum or proportion or percentage of the employee’s pay to be earmarked for pension. Rather, at its core; Employee Retirement Security Act only makes it incumbent upon the employer to provide details and updates to his or her employees of existing pension plans in the market.
Providing information is not optional
Employee Retirement Security Act makes it mandatory for employers to provide participating employees details about the pension plans, such as how plan features and funding work. It also sets minimum standards for areas in the plan, such as participation, benefit accrual, vesting, and funding. Another requirement of the Employee Retirement Security Act is accountability of plan fiduciaries. It also gives participants the right to sue for benefits and breaches of fiduciary duty.
Description of these features
Some of the Employee Retirement Security Acts’ features can be elucidated thus:
Accountability of plan fiduciaries: According to the Employee Retirement Security Act, a fiduciary is one who is entrusted with the task of exercising discretionary authority or control over a plan's management or assets. This can include the investment advisor to the plan. When these fiduciaries do not follow the defined set of conduct; they could be held responsible for repairing the losses caused to the plan.
Guarantees payment of certain benefits: the Employee Retirement Security Act mandates when a defined plan is terminated. This is executed through a federally chartered corporation, known as the Pension Benefit Guaranty Corporation.
References: http://bit.ly/TpzYAN
The Employee Retirement Security Act, known more popularly by its acronym ERISA, is a federal law passed in 1974. It was enacted with the purpose of setting up minimum standards for pension plans in the private sector. The outstanding feature of the Employee Retirement Security Act is that while it does not require an employer to compulsorily set up a pension plan for his employees; those who set one up are bound to follow the rules set out in this Act.
Closely related to the first of the features mentioned above; Employee Retirement Security Act does not require a stipulated sum or proportion or percentage of the employee’s pay to be earmarked for pension. Rather, at its core; Employee Retirement Security Act only makes it incumbent upon the employer to provide details and updates to his or her employees of existing pension plans in the market.
Providing information is not optional
Employee Retirement Security Act makes it mandatory for employers to provide participating employees details about the pension plans, such as how plan features and funding work. It also sets minimum standards for areas in the plan, such as participation, benefit accrual, vesting, and funding. Another requirement of the Employee Retirement Security Act is accountability of plan fiduciaries. It also gives participants the right to sue for benefits and breaches of fiduciary duty.
Description of these features
Some of the Employee Retirement Security Acts’ features can be elucidated thus:
Accountability of plan fiduciaries: According to the Employee Retirement Security Act, a fiduciary is one who is entrusted with the task of exercising discretionary authority or control over a plan's management or assets. This can include the investment advisor to the plan. When these fiduciaries do not follow the defined set of conduct; they could be held responsible for repairing the losses caused to the plan.
Guarantees payment of certain benefits: the Employee Retirement Security Act mandates when a defined plan is terminated. This is executed through a federally chartered corporation, known as the Pension Benefit Guaranty Corporation.
References: http://bit.ly/TpzYAN