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Simple English definitions for legal terms
ERISA
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A quick definition of ERISA:
ERISA: A law that sets rules for how companies manage their employees' retirement plans. It also gives employees the right to sue their employer if they don't follow these rules. If an employer breaks the rules, they have to make things right by giving the employee the money they lost. The law also says that the person in charge of the retirement plan can't be the same person who decides who gets the money. This is to make sure that the person in charge doesn't make decisions that are bad for the employees.
A more thorough explanation:
ERISA stands for the Employee Retirement Income Security Act of 1974. It is a federal law that sets minimum standards for how private industry pension plans are managed and how federal income taxes affect these plans. ERISA also gives employees the right to sue their employers if they breach their fiduciary responsibilities.
For example, if an employer fails to properly manage a pension plan and an employee loses money as a result, that employee can sue the employer for breach of fiduciary duty. The remedy for this breach is equity, which means the employee can seek "make whole money" to replace the amount lost.
ERISA also requires that plan managers cannot have both the responsibility of determining a participant's eligibility to receive benefits and the responsibility of paying the benefits. This creates a conflict of interest, which the court can consider when reviewing the reasonableness of an administrator's decision.
Overall, ERISA is important because it helps protect employees' retirement savings and ensures that employers are held accountable for properly managing pension plans.