The Common Law

ERISA is an acronym for the Employee Retirement Income Security Act, a federal statute enacted in 1974 to regulate employee benefit plans (e.g., group health plans, pension plans, etc.).

Essentially, where an employer chooses to offer a pension plan, ERISA protects an employee's rights with respect to that plan by imposing certain regulations on its operation and administration, including regulations governing how plans are funded. Pension plan administrators, for example, must provide summaries of the plan to participants and are under strict fiduciary duties with respect to plan participants. They may not engage in certain transactions, such as any transactions with the plan by a party whose interests are adverse to the plan's beneficiaries (i.e., the employees who have invested in the plan). There are also limits on how much of the employer's stock or securities may be held by the plan. (An employer may not, with certain exceptions, invest more than 10% of the pension plan's money in the employer's own stock.)

The failure of a plan administrator to comply with his or her duties to employees can have serious consequences. The administrator may, among other things, be held personally liable for making good all losses sustained by a pension plan as a result of the administrator's breach of his or her duties. In certain cases, an administrator may be criminally liable for violations of ERISA.

ERISA also provides for some federal oversight of pension plans and established the Pension Benefit Guarantee Corporation, a branch of the Department of Labor responsible for insuring and regulating certain pension plans covered by ERISA. The PBGC may, among other things, initiate investigations of pension plans and order audits of certain plans.

ERISA generally applies to all employee benefit plans; there are exceptions, however. For example, ERISA does not cover plans provided by the federal government or certain plans provided by churches. Precisely what types of plans are "covered" by the statute and the exact requirements of the statute are exceedingly complicated and are governed by the terms of ERISA, federal regulations, and court decisions. If you have questions about ERISA, you may wish to contact an attorney. You may also contact the PBGC at 800/400-7242, or at www.pbgc.gov.