What Is ERISA and Does It Apply To Me?

The Employee Retirement Income Security Act, or ERISA, is a law established in 1974 to protect employees and their company-linked pension plans. The law grants protection to you as an employee to help shield your hard-earned money from mismanagement or loss. It doesn’t require a company to provide benefits, but it sets specific standards and regulations for those benefit plans once they are provided. 

ERISA applies to all employee benefit plans offered by nearly any private organization. If you’re an employee of almost any privately-owned business or nonprofit that’s not a church, then ERISA regulates your retirement and health benefits. While ERISA won’t cover some specific benefits from your employer like sick pay, most others are covered including pensions, health plans, severance, unemployment, and more.

Benefits of ERISA

ERISA laws and regulations impose specific requirements on your employer governing how they administer and manage your benefits, and they give you certain guarantees. Employers have to provide you with clear and adequate information about your plan from the outset, and then again each year as the plan continues. There are strict requirements for what they need to report both to you and the government. 

Administrators of your plan covered by ERISA must comply with their own plan’s rules, and must write and administer their program in compliance with reasonable, responsible standards set by the 1974 law. These regulations ensure that your plan is carefully managed and administered without waste or mismanagement. Those with the responsibility to manage your benefits and the money involved can be held accountable if they do something wrong. You can appeal or challenge their behavior if you believe you haven’t been properly treated. 

ERISA has been steadily expanded over time to place more restrictions on companies offering such benefit options. It’s because of these restrictions that private companies can’t stop older employees from participating in retirement plans. It’s also why companies must allow spouses access to benefits after death or divorce in qualifying circumstances. 

Why Is It Important? 

Without the protections that ERISA and its amendments offer, you would be at the mercy of your employer to mistreat you or restrict your access to promised benefits. There would be little consequence for businesses that waste your pension funds, misinform you on the status of your benefits, or make it hard for you to utilize them.  

Many companies in the past would end pensions suddenly if revenues went down or would use pension money for investing in other goals in the business. Employees were left stranded without the promised pension benefits on which they depended. ERISA was passed to protect those employees and ensure that companies continue to fund the benefits they have promised to their workers.