3.f Flashcards
(7 cards)
What is ERISA?
ERISA was established to prevent abuse and misuse of pension funds.
Its main goal is to protect the retirement assets of employees in the private sector.
Which types of retirement plans are covered by ERISA? Which are not covered?
Covered by ERISA:
* Private-sector (corporate) retirement plans (e.g., 401(k)s, corporate pensions).
* Certain union plans.
NOT Covered by ERISA:
* Public-sector plans (plans for federal, state, or local government workers).
Under ERISA, who must be eligible to participate in a company’s retirement plan?
All employees who are:
1. Age 21 or older, AND
2. Have completed one year of full-time service (defined as 1,000 hours or more of work).
What does ERISA require regarding the money in a retirement plan?
- Plan funds must be segregated from other corporate assets.
- The plan’s trustees must manage the money prudently and in the best interest of all participants.
What is ‘vesting’ under ERISA?
Vesting is the employee’s right to own the employer’s contributions to the plan (like an employer match).
- ERISA sets limits on how long an employer can make you wait to be fully vested.
- An employee is always 100% vested in their own contributions.
What does ERISA require employers to communicate to plan participants?
The employer must provide:
1. A written plan document.
2. Annual statements of account.
3. Updates on plan benefits.
What does the nondiscrimination rule in ERISA mean?
All eligible employees must be treated impartially. The plan must use a formula that is applied uniformly to everyone.
It prevents the plan from favoring highly compensated employees over others.
