CFP

AAA

Types of Retirement Plans - Regulatory considerations

What You Should Know About Your Retirement Plan, U.S. Department of Labor, November 2006

A. ERISA

Employee Retirement Income Security Act of 1974
Known by the acronym ERISA, this federal law governs the operation of qualified plans. It establishes rules that qualified plans must follow to protect plan assets for participants.

It applies to most private employer and union sponsored retirement plans. Excluded are federal, state and local government plans and most church plans. Rules may also differ for plans negotiated under collective bargaining agreements.

Watch out for questions about how ERISA applies to traditional and Roth IRAs. It doesn't. Individual IRAs are not employer-sponsored plans, and therefore do not fall under ERISA. SIMPLE and SEP IRAs do.

ERISA does not require an employer to maintain a retirement plan, but if the employer does, ERISA specifies when an employee must be allowed to become a participant, how long they have to work before they have a non-forfeitable interest in their pension, how long a participant can be away from their job before it might affect their benefit, and whether their spouse has a right to part of their pension in the event of their death.

  • Pension Benefit Guaranty Corporation (PBGC) - A federally chartered corporation created by ERISA that guarantees payment of pension benefits if a pension plan is terminated. The PBGC is funded by insurance premiums paid by the sponsors of employee retirement plans.

Maximum annual benefit guarantee - $59,318.16 for 2014 ($4,943.18 monthly).

B. Department of Labor

Regulations
The U.S. Department of Labor is responsible for enforcing the provisions of ERISA. The Employee Benefits Security Administration (EBSA) is the Department of Labor arm that oversees ERISA provisions that govern the conduct of plan fiduciaries, the investment and protection of plan assets, the reporting and disclosure of plan information, and participants' rights and responsibilities.

Fiduciary Liability Issues
comments powered by Disqus
Related Articles
  1. Fee-Only Financial Advisers: What You ...
    Investing Basics

    Fee-Only Financial Advisers: What You ...

  2. Another Sound Lesson In Risk Management
    Investing News

    Another Sound Lesson In Risk Management

  3. Choosing The Right ETF Index To Reach ...
    Investing News

    Choosing The Right ETF Index To Reach ...

  4. Using Normal Distribution Formula To ...
    Investing Basics

    Using Normal Distribution Formula To ...

  5. Hypothesis Testing in Finance: Concept ...
    Active Trading Fundamentals

    Hypothesis Testing in Finance: Concept ...

Trading Center