Everything You Need to Know about ERISA
We all are familiar with Batman, right? You know, the vigilante with a black cape and black leather suit – most recently portrayed by Christian Bale and Ben Affleck in the movies. Basically, Batman is the community’s protector – at least in the world of comics.
Why the Batman interest? Well, ERISA is the U.S. Department of Labor’s “Batman” when it comes to Americans’ retirement assets. No seriously, it really is. Read on to learn how.
In more detail…
Passed in 1974, ERISA, short for the Employee Retirement Security Act, is a federal law pertaining to private industry pension and healthcare plans. Why do you need to know about it? It is super important. Businesses must remain compliant with the legal jargon under ERISA. Working with licensed brokers like Decisely can ensure your business is compliant.
To really let you in on what this act is all about, ERISA ensures that any funds placed into retirement plans during an employee’s working life will be safe and secure when that employee goes to retire. Hence the “security” part of the act.
For pension plans, ERISA stipulates when an employee can become a participant in the plan, how long an employee can take time away from their job before their pension plan is impacted, and if a spouse can participate in the pension plan in the event of the employee’s death.
Let’s be clear here: as an employer, you do not have to offer any form of pension plan. ERISA simply outlines the minimum requirements for you if you do decide to offer your employees this option.
Here are the requirements…
ERISA states that you must provide employees readily available information on the features and funding options for retirement and pension plans. Not only that, but it also sets the standard for participating, vesting, and accrual options. Essentially, how often an employee can contribute to their plan and how much they can contribute.
Let’s not forget about plan fiduciaries. Holy big words, Batman! To make it a bit clearer, a plan fiduciary is a person that has discretionary control in terms of managing the plan and the assets in it. A fiduciary also has the power to change the investments in the plan. On the flip side, ERISA also protects plan participants (mainly your employees) by giving them the right to sue for any breaches by their fiduciary.
Phew! You may be thinking all of that is a whole lot of big words and even more to remember, but like I said, working with the right broker ensures your compliance. So you can continue to go about your business with no sweat. And without capes no less.