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Simple English definitions for legal terms
Employee Retirement Income Security Act (ERISA)
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A quick definition of Employee Retirement Income Security Act (ERISA):
Employee Retirement Income Security Act (ERISA): A law made in 1974 that created new rules for how companies manage retirement plans for their employees. This law was made because many people lost their retirement money when their company went bankrupt. ERISA made it so that employees have to be told important information about their retirement plan, like how much money they need to put in and how long they have to work before they can retire. Companies also have to make sure they have enough money to pay for their employees' retirement. If a company can't pay, the government has a special agency called the Pension Benefit Guaranty Corporation (PBGC) that will help pay for the retirement plan.
A more thorough explanation:
The Employee Retirement Income Security Act of 1974 (ERISA) is a law that sets standards for privately-sponsored employee retirement plans. It was created to prevent situations where employees lost their retirement benefits due to mismanagement of funds, such as the Studebaker collapse of 1963.
ERISA requires employers to provide certain information to employees about their retirement plans, including how much they need to contribute and how long they need to work before they can claim benefits. Employers are also required to have funding systems in place to support their pension plans, and pension plan managers have new fiduciary duties.
One important aspect of ERISA is the creation of the Pension Benefit Guaranty Corporation (PBGC), which is a government agency that ensures payments to employees for certain pension plans if the employer becomes insolvent.
For example, if an employee works for a company for 20 years and contributes to their pension plan, they can expect to receive retirement benefits once they reach a certain age. ERISA ensures that the employer has a funding system in place to support the pension plan and that the employee is informed about the details of their plan.