faq erisa solutions

Frequently Asked Questions

FAQ: What is ERISA?

Answer: The Employee Retirement Income Security Act of 1974, or ERISA, protects the assets of millions of Americans so that funds placed in retirement plans during their working lives will be there when they retire.

FAQ: Can a plan reduce promised benefits?

Defined benefit plans may change the rate at which you earn future benefits but cannot reduce the amount of benefits you have already accumulated. For example, a plan that accrues benefits at the rate of $5 a month for years of service through 2016 may be amended to provide that for years of service beginning in 2017 benefits will be credited at the rate of $4 per month. Plans that make a significant reduction in the rate at which benefits accumulate must provide you with written notice generally at least 45 days before the change goes into effect.


Also, in most situations, if a company terminates a defined benefit plan that does not have enough funding to pay all of the promised benefits, the Pension Benefit Guaranty Corporation (PBGC) will pay plan participants and beneficiaries some retirement benefits, but possibly less than the level of benefits promised. (For more information, see the PBGC’s Website at pbgc.gov.)
In a defined contribution plan, the employer may change the amount of employer contributions in the future.

Depending on the plan terms, the employer may also be able to stop making contributions for a few years or indefinitely.
An employer may terminate a defined benefit or a defined contribution plan, but may not reduce the benefit you have already accrued in the plan.

FAQ: What are the responsibilities of plan fiduciaries?

Fiduciaries have important responsibilities and are subject to certain standards of conduct because they act on behalf of the participants in the plan. These responsibilities include:

Acting solely in the interest of plan participants and their beneficiaries, with the exclusive purpose of providing benefits to them;

Carrying out their duties with skill, prudence, and diligence;

Following the plan documents (unless inconsistent with ERISA);

Diversifying plan investments;

Paying only reasonable expenses of administering the plan and investing its assets; and

Avoiding conflicts of interest.
The fiduciary also is responsible for selecting the investment providers and the investment options, and for monitoring their performance. Some plans, such as most 401(k) or profit-sharing plans, can be set up to permit participants to choose the investments in their accounts (within certain investment options provided by the plan). If the plan is properly set up to give participants control over their investments, then the fiduciary is not liable for losses resulting from the participant’s investment decisions. Department of Labor rules provides guidance designed to make sure participants have sufficient information on the specifics of their investment options so they can make informed decisions. This information includes:

A description of each investment option, including the investment goals, risk, and return characteristics;

Information about any designated investment managers;

An explanation of when and how to request changes in investments, plus any restrictions on when you can change investments;

A statement of the fees that may be charged to your account when you change investment options or buy and sell investments; and

The name, address, and telephone number of the plan fiduciary or other person designated to provide certain additional information on request.

Find out if you are within the group of employees covered by your employer’s retirement plan. Federal law allows employers to include certain groups of employees and exclude others from a retirement plan. For example, your employer may sponsor one plan for salaried employees and another for union employees. Part-time employees may be eligible if they work at least 1,000 hours per year, which is about 20 hours per week. So if you work part-time, find out if you are covered.

FAQ: What are employee stock ownership plans (ESOPs)?

Employee Stock Ownership Plan (ESOP) – A type of defined-contribution plan that is invested primarily in employer stock.

FAQ: Who can participate in your employer's retirement plan?

Once you have learned what type of retirement plan your employer offers, you need to find out when you can participate in the plan and begin to earn benefits. Plan rules can vary as long as they meet the requirements under Federal law. You need to check with your plan or review the plan booklet (called the Summary Plan Description) to learn your plan’s rules and requirements. Your plan may require you to work for the company for a period of time before you may participate in the plan. In addition, there typically is a time frame for when you begin to accumulate benefits and earn the right to them (sometimes referred to as “vesting”).


Find out if you are within the group of employees covered by your employer’s retirement plan. Federal law allows employers to include certain groups of employees and exclude others from a retirement plan. For example, your employer may sponsor one plan for salaried employees and another for union employees. Part-time employees may be eligible if they work at least 1,000 hours per year, which is about 20 hours per week. So if you work part-time, find out if you are covered.

FAQ: What if your employer goes bankrupt?

Generally, your retirement assets should not be at risk if your employer declares bankruptcy. Federal law requires that retirement plans fund promised benefits adequately and keep plan assets separate from the employer’s business assets. The funds must be held in trust or invested in an insurance contract. The employers’ creditors cannot make a claim on retirement plan funds. However, it is a good idea to confirm that any contributions your employer deducts from your paycheck are forwarded to the plan’s trust or insurance contract in a timely manner.
Significant business events such as bankruptcies, mergers, and acquisitions can result in employers abandoning their individual account plans (e.g., 401(k) plans), leaving no plan fiduciary to manage it. In this situation, participants often have great difficulty in accessing the benefits they have earned and have no one to contact with questions. Custodians such as banks, insurers, and mutual fund companies are left holding the assets of these plans but do not have the authority to terminate the plans and distribute the assets. In response, the Department of Labor issued rules to create a voluntary process for the custodian to wind up the plan’s business so that benefit distributions can be made and the plan terminated. Information about this program can be found on the Department of Labor’s Website at dol.gov/agencies/ebsa.

FAQ: What does ERISA do?

ERISA does the following:

Requires plans to provide participants with information about the plan including important information about plan features and funding. The plan must furnish some information regularly and automatically. Some is available free of charge, some is not.


Sets minimum standards for participation, vesting, benefit accrual and funding. The law defines how long a person may be required to work before becoming eligible to participate in a plan, to accumulate benefits, and to have a nonforfeitable right to those benefits. The law also establishes detailed funding rules that require plan sponsors to provide adequate funding for your plan.

Requires accountability of plan fiduciaries. ERISA generally defines a fiduciary as anyone who exercises discretionary authority or control over a plan’s management or assets, including anyone who provides investment advice to the plan. Fiduciaries who do not follow the principles of conduct may be held responsible for restoring losses to the plan.


Gives participants the right to sue for benefits and breaches of fiduciary duty. Guarantees payment of certain benefits if a defined plan is terminated, through a federally chartered corporation, known as the Pension Benefit Guaranty Corporation.

FAQ: What is the role of the Labor Department?

The U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) is the agency responsible for enforcing the provisions of ERISA that govern the conduct of plan fiduciaries, the investment and protection of plan assets, the reporting and disclosure of plan information, and participants’ benefit rights and responsibilities.
However, not all retirement plans are covered by ERISA. For example, Federal, state, or local government plans and some church plans are not covered.
The Department of Labor enforces the law by informally resolving benefit disputes, conducting investigations, and seeking correction of violations of the law, including bringing lawsuits when necessary.
The Department has benefits advisors committed to providing individual assistance to participants and beneficiaries. Participants will receive information on their rights and responsibilities under the law and help in obtaining benefits to which they are entitled.

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