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The Employee Retirement Income Security Act


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The Employee Retirement Income Security Act of 1974 (ERISA) is a federal statute that established minimum standards for pension plans being created in private industry. The Act provides for extensive rules and regulations concerning the federal income tax effects on transactions which are related to employee benefit plans.

ERISA protects the interests of individuals who participate in employee benefit plans as well as their employees. The plan requires the complete disclosure of pension plans’ financial information and other information concerning the plan. The act establishes standards of conduct for plan fiduciaries and provides appropriate remedies and access to the federal courts.

While ERISA is sometimes used to refer to all laws referring to and regulating employee benefit plans, the majority of laws are found in the Internal Revenue Code. The Internal Revenue Code is the body of law that concerns the Internal Revenue Society (IRS).

Just like any other law, it has to be enforced. ERISA is enforced by the Department of Labor, the Department of the Treasury, the Department of the Treasury in particular the Internal Revenue Service, and the Pension Benefit Guaranty Corporation.

ERISA's history can be traced, really, to 1961 when President John F. Kennedy created the President's Committee on Corporate Pension Plans. Pension reform became a movement when the Studebaker Corporation, an automobile manufacturer, closed its plant in 1963. The Studebaker pension fund was so poorly funded and maintained that Studebaker couldn't actually give its employees their pensions.

To combat this problem, Studebaker created three groups. Group 1 pensioners had reached the retirement age of 60 and so got their full pension plan. It was made up of 3,600 workers. Group 2 was made of up workers between the ages of 40 and 59 who had been employed by Studebaker for at least 10 years. This group contained 4,000 workers who all got a lump sum payment that was equivalent to roughly 15% of the actual value of their pension benefits. Group 3 was made up of roughly 2,900 workers with no vested pension rights. This group got absolutely nothing for their hard work and supposed pension plan.

In 1970, NBC broadcast Pensions: The Broken Promise. This was an hour-long television special that documented millions of Americans who were the victims of poorly funded pension plans and awful vesting requirements. This documentary served as the turning point which ended up creating ERISA in 1974. The Act was signed by President Gerald Ford.

For more information on ERISA and the protections offered retirement savings, please visit

Joseph Devine


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