What Is The Employee Retirement Income Security Act

Date:

G Buyouts Mergers And Consolidations

Introduction to Employee Retirement Income Security Act (ERISA) Part 1 of 4 by Gary Young

If a company is purchased by another firm, participants and beneficiaries in the acquired company may not be denied pension benefits already earned, and PBGC insurance protections continue to apply to those benefits. In the event of a plan merger, consolidation, or transfer of plan assets or liabilities, the participant’s benefit must be equal to, or greater than, the benefit to which the participant would have been entitled had the plan been terminated immediately before the merger, consolidation, or transfer.87

Enrollment By Board Standards And Qualifications Suspension Or Termination Of Enrollment

The Joint Board shall, by regulations, establish reasonable standards and qualifications for persons performing actuarial services with respect to plans in which this chapter applies and, upon application by any individual, shall enroll such individual if the Joint Board finds that such individual satisfies such standards and qualifications. With respect to individuals applying for enrollment before January 1, 1976, such standards and qualifications shall include a requirement for an appropriate period of responsible actuarial experience relating to pension plans. With respect to individuals applying for enrollment on or after January 1, 1976, such standards and qualifications shall include

education and training in actuarial mathematics and methodology, as evidenced by

a degree in actuarial mathematics or its equivalent from an accredited college or university,

successful completion of an examination in actuarial mathematics and methodology to be given by the Joint Board, or

successful completion of other actuarial examinations deemed adequate by the Joint Board, and

an appropriate period of responsible actuarial experience.

Notwithstanding the preceding provisions of this subsection, the Joint Board may provide for the temporary enrollment for the period ending January 1, 1976, of actuaries under such interim standards as it deems adequate.

has failed to discharge his duties under this chapter, or

Editorial Notes

References in Text

Repeal And Effective Date

The Welfare and Pension Plans Disclosure Act is repealed except that such Act shall continue to apply to any conduct and events which occurred before the effective date of this part.

Section 664 of title 18 is amended by striking out “any such plan subject to the provisions of the Welfare and Pension Plans Disclosure Act” and inserting in lieu thereof “any employee benefit plan subject to any provisions of title I of the Employee Retirement Income Security Act of 1974”.

Section 1027 of such title 18 is amended by striking out “Welfare and Pension Plans Disclosure Act” and inserting in lieu thereof “title I of the Employee Retirement Income Security Act of 1974”, and by striking out “Act” each place it appears and inserting in lieu thereof “title”.

The heading for such section is amended by striking out ” welfare and pension plans disclosure act ” and inserting in lieu thereof ” employee retirement income security act of 1974″.

The table of sections of chapter 47 of such title 18 is amended by striking out “Welfare and Pension Plans Disclosure Act” in the item relating to section 1027 and inserting in lieu thereof “Employee Retirement Income Security Act of 1974”.

Section 211 of the Labor-Management Reporting and Disclosure Act of 1959 is amended by striking out “Welfare and Pension Plans Disclosure Act” and inserting in lieu thereof “Employee Retirement Income Security Act of 1974”.

Except as provided in paragraph , this part ) shall take effect on January 1, 1975.

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Someone Has To Be In Charge

Providing a retirement plan is a generous perk for employees not only because of the time and expense required to run the plan. Retirement plans can also be a huge liability for employers because they come with a tremendous amount of responsibility for at least some of the people acting on behalf of the plan.

You have to have someone in charge to make decisions on behalf of the workers. And that is the ERISA fiduciary, says Campbell.

The fiduciary makes decisions about hiring a retirement plan provider and selecting the investment options available to participants.

They have to act solely in the interest of the beneficiaries, who are the participants. They have to act prudently, which is all about a process behind the decisions, he says.

Fiduciaries are personally liable if they fail to live up to the standards and it causes a loss. In other words, they might have to pay for losses with their own funds if theyre found to be at fault.

Erisa Title Iv: Pension Benefit Guaranty Corporation And Plan Termination

ERISA  Broemer &  Associates, PLLC

Title IV of ERISA established the Pension Benefit Guaranty Corporation as a government-owned corporation to protect the retirement income of participants and beneficiaries in private-sector defined benefit pension plans. Defined contribution plans such as ESOPs, profit-sharing plans, 401, 403, thrift/savings plans, and stock bonus plans are not insured by the PBGC. The insurance program treats pension plans differently depending on whether they are single-employer plans or multiemployer plans . The PBGC maintains separate reserve funds for single-employer plans and multiemployer plans.

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Summary Of The Employee Retirement Income Security Act

Due to the recent economic decline and the desire to enact large-scale health reform, the current federal regulation of pension plans, health plans, and other employee benefit plans has received considerable congressional attention. The Employee Retirement Income Security Act of 1974 provides a comprehensive federal scheme for the regulation of employee pension and welfare benefit plans offered by private-sector employers. ERISA contains various provisions intended to protect the rights of plan participants and beneficiaries in employee benefit plans. These protections include requirements relating to reporting and disclosure, participation, vesting, and benefit accrual, as well as plan funding. ERISA also regulates the responsibilities of plan fiduciaries and other issues regarding plan administration. ERISA contains various standards that a plan must meet in order to receive favorable tax treatment, and also governs plan termination. This report provides background on the pension laws prior to ERISA, discusses various types of employee benefit plans governed by ERISA, provides an overview of ERISAâs requirements, and includes a glossary of commonly used terms.

Understanding The Rules And Regulations In Erisa

ERISA covers the vast majority of retirement plans. A few examples of plans that fall under its umbrella include 401k plans, employee pension plans, profit-sharing plans, 403b plans, and even deferred compensation plans.

Other examples of plans that the act covers include:

  • Flexible spending accounts
  • Disability insurance.

ERISA requires that fiduciaries are accountable for these plans.

Fiduciaries must act in the best interests of the clients, which are the employees. If fiduciaries do not follow the best practices in the industry, they could be held responsible, forcing them to restore any losses that the plan might have incurred. Furthermore, ERISA also ensures that fiduciaries are not allowed to misuse any of the plan assets.

In addition, small business owners need to understand that ERISA also sets minimum standards related to funding plans, benefit accrual, participation, and vesting in these plans. For example, ERISA specifies how long a person might need to work before they can participate in the plan.

ERISA also states rules that require any sponsors of the plan to give adequate contributions, ensuring retirees have access to these benefits when the time comes.

Note: ERISA does not protect every retirement plan. For example, the law does not cover IRAs. It also does not cover plans that have been set up by government organizations and churches.

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Title Iv: Plan Termination Insurance

Title IV created the Pension Benefit Guaranty Corporation to insure benefits of participants in underfunded terminated plans. It also describes the procedures that a pension plan must follow to terminate itself, and for the PBGC to initiate an involuntary termination.

Standard termination

An employer may terminate a single-employer plan under a standard termination if the plan’s assets equal or exceed its liabilities. If the assets are less than the liabilities, the employer must contribute the amount necessary to fully fund the plan. A standard termination is sometimes referred to as a voluntary termination because the employer has chosen to terminate the plan.

In a standard termination, all accrued benefits under the plan become 100% vested. The plan must purchase annuity contracts for all participants. If the plan permits the payment of lump sums, employees may be offered the choice of a lump sum payment or an annuity.

If any assets remain in the plan after a standard termination has been completed, the provisions of the plan control their treatment. In some plans, the excess assets revert to the employer in other plans, the excess assets must be used to increase participants’ benefits.

Distress termination

An employer may terminate a single-employer plan under a distress termination if the employer demonstrates to the PBGC that one of these conditions exists:

Termination initiated by the PBGC

A multiemployer plan may be terminated in one of three ways:

Definition And Examples Of Erisa

Employee Retirement Income Security Act ( ERISA)

ERISA is a comprehensive federal law that protects employees in employer-sponsored health and retirement plans, except those offered by government entities or churches . It requires most private employers that voluntarily offer benefits to comply with federal and state regulations or face penalties.

The act covers retirement benefits including pensions, profit-sharing plans, employer-sponsored individual retirement accounts and 401s welfare plans like health, dental, disability, and life insurance health care plans offered through employers as well as scholarship funds, vacation, and severance pay.

ERISA requires plan sponsors to provide plan participants and beneficiaries with important benefit information, including coverage, costs, and funding. It also holds plan managers and fiduciaries accountable through established rules of conduct and safeguards plan funds from mismanagement and abuse.

In the case of termination, fund mismanagement, or fiduciary wrongdoing, ERISA guarantees payment of benefits through the federally chartered corporation, Pension Benefit Guaranty Corporation . It also allows plan participants to sue through a grievance and appeals process to obtain their benefits.

  • Acronym: ERISA

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Advisory Council On Employee Welfare And Pension Benefit Plans

Establishment membership terms appointment and reappointment vacancies quorum

There is hereby established an Advisory Council on Employee Welfare and Pension Benefit Plans consisting of fifteen members appointed by the Secretary. Not more than eight members of the Council shall be members of the same political party.

Members shall be persons qualified to appraise the programs instituted under this chapter.

Of the members appointed, three shall be representatives of employee organizations three shall be representatives of employers three representatives shall be appointed from the general public, one of whom shall be a person representing those receiving benefits from a pension plan and there shall be one representative each from the fields of insurance, corporate trust, actuarial counseling, investment counseling, investment management, and the accounting field.

Members shall serve for terms of three years except that of those first appointed, five shall be appointed for terms of one year, five shall be appointed for terms of two years, and five shall be appointed for terms of three years. A member may be reappointed. A member appointed to fill a vacancy shall be appointed only for the remainder of such term. A majority of members shall constitute a quorum and action shall be taken only by a majority vote of those present and voting.

Duties and functions

Executive secretary secretarial and clerical services

Compensation

Termination

Regulations

Coordination Of Enforcement Regarding Violations Of Certain Health Care Provider Requirements Complaint Process

Investigating violations

Upon receiving a notice from a State or the Secretary of Health and Human Services of violations of sections 300gg131, 300gg132, or 300gg135 of title 42 , the Secretary of Labor shall identify patterns of such violations with respect to participants or beneficiaries under a group health plan or group health insurance coverage offered by a health insurance issuer and conduct an investigation pursuant to section 1134 of this title where appropriate, as determined by the Secretary. The Secretary shall coordinate with States and the Secretary of Health and Human Services, in accordance with section 1136 of this title and with section 104 of Health Insurance Portability and Accountability Act of 1996, where appropriate, as determined by the Secretary, to ensure that appropriate measures have been taken to correct such violations retrospectively and prospectively with respect to participants or beneficiaries under a group health plan or group health insurance coverage offered by a health insurance issuer.

Complaint process

Not later than January 1, 2022, the Secretary shall ensure a process under which the Secretary

may receive complaints from participants and beneficiaries of group health plans or group health insurance coverage offered by a health insurance issuer relating to alleged violations of the sections specified in subsection and

Editorial Notes

References in Text

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Procedures In Connection With Prohibited Transactions

Notification to Secretary of Labor opportunity to comment on imposition of tax under section 4975 of title 26 waiver requests for investigations

Unless the Secretary of the Treasury finds that the collection of a tax is in jeopardy, in carrying out the provisions of section 4975 of title 26 the Secretary of the Treasury shall, in accordance with the provisions of subsection of such section, notify the Secretary of Labor before sending a notice of deficiency with respect to the tax imposed by subsection or of such section, and, in accordance with the provisions of subsection of such section, afford the Secretary an opportunity to comment on the imposition of the tax in any case. The Secretary of the Treasury shall have authority to waive the imposition of the tax imposed under section 4975 in appropriate cases. Upon receiving a written request from the Secretary of Labor or from the Pension Benefit Guaranty Corporation, the Secretary of the Treasury shall cause an investigation to be carried out with respect to whether the tax imposed by section 4975 of title 26 should be applied to any person referred to in the request.

Consultation

Transmission of information to Secretary of the Treasury

Whenever the Secretary of Labor obtains information indicating that a party-in-interest or disqualified person is violating section 1106 of this title , he shall transmit such information to the Secretary of the Treasury.

Statutory Notes and Related Subsidiaries

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Who Must Be Covered

ERISA makes it an unlawful act for any person to “receive, handle, disburse, or otherwise exercise custody or control of plan funds or property” without being properly bonded.

The Department of Labor offers six factors that define when a person is “handling” funds during the prior year. They are posed as questions, and if the answer to any of these questions is “yes,” then that person is “handling” funds:

  • Did the person have contact with cash, checks, or similar property that belongs to the plan?
  • Did the person have the authority or power to transfer funds from the plan, either to themselves or to a third party?
  • Did the person have the authority or power to negotiate around property that belongs to the plan? (The DOL offers examples such as taking out a mortgage on a piece of real estate, holding the title to land or buildings, or being in possession of stock certificates.
  • Did the person have some other disbursement power or the authority to direct others to disburse funds?
  • Can the person sign checks or other negotiable instruments drawn against the funds in the plan?
  • Is the person in charge of any activities or of making any decisions that require bonding?
  • How Can Small Business Owners Manage The Rules And Regulations Of Erisa

    Because ERISA comes with a lot of complicated rules, many small business owners hesitate to set up retirement accounts. They are nervous about the regulatory risk they incur, and they are worried that they might not be able to fund the plans appropriately.

    Fortunately, there are options available for small business owners who are looking for ways to avoid the complicated regulations of this federal law.

    For example, some small business owners are able to set up a plan called a SIMPLE IRA. This is a retirement savings plan for small business owners that have 100 or fewer employees. In this case, it stands for Savings Incentive Match Plans for Employees.

    It is important to note that ERISA still covers all SIMPLE IRAs. However, they do not include the red tape, bureaucracy, and regulations that other retirement plans require, such as a 401k. Small business owners do not have to worry about dealing with reporting requirements as frequently.

    Small business owners interested in setting up a SIMPLE IRA need to use the designated forms from the IRS. These are the 5304 SIMPLE or the 5305 SIMPLE.

    Then, employers simply need to follow the rules regarding:

    • Which employees are eligible

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