Employee Retirement Income Security Act Of 1974
What Does Employee Retirement Income Security Act Of 1974 Mean?
The Employment Retirement Income Security Act of 1974 (ERISA) is a U.S. law that establishes standards for the management of employee retirement plans. The primary purpose of this law is to ensure that those entrusted with managing retirement funds do not misuse them. ERISA also provides employers with access to essential information regarding these plans, including eligibility for participation and the timetable for the accumulation of benefits.
Insuranceopedia Explains Employee Retirement Income Security Act Of 1974
ERISA was established in response to issues of mismanagement in the retirement plans of private employees. In the 20th century, various laws were enacted to address this problem. For example, the Revenue Acts of 1921 and 1926 allowed employers to deduct pension plan contributions from employee salaries without incurring taxes on those deductions. The Revenue Act of 1942 introduced mandatory disclosure requirements.
In 1959, the Welfare and Pensions Disclosure Act required the U.S. Department of Labor to mandate descriptions of retirement plans and annual financial reports, which were also provided to plan participants and their beneficiaries. However, ERISA further increased the disclosure requirements for participants and mandated more detailed reports to the government.
Subsequent legislation has continued to strengthen ERISA. The Retirement Equity Act of 1984 lowered the maximum age at which an employee can access a retirement plan. Additionally, the Pension Protection Act of 2006 enhanced transparency in pension plan funding by introducing new notice requirements.
