top of page
Asset Consulting Group, Inc.
ERISA
What is ERISA?
The Employee Retirement Income Security Act of 1974, or ERISA, protects the assets of millions.
ERISA is a federal law that sets minimum standards for pension plans in private industry.
ERISA does not require any employer to establish a pension plan. It only requires that those who establish plans must meet certain minimum standards
ERISA does the following:
Ø      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.
Ø      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 non-forfeitable right to those benefits. The law also establishes detailed funding rules that require plan sponsors to provide adequate funding for your plan.
Ø      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.
Ø      Gives participants the right to sue for benefits and breaches of fiduciary duty.
Ø      Guarantees payment of certain benefits if a defined plan is terminated, through a federally chartered corporation, known as the Pension Benefit Guaranty Corporation.
ERISA Section 404(c)
"How can sponsors reduce their liability? - Section 404(c) Guidelines
By adhering to regulations under Section 404(c) of the Employee Retirement Income Security Act (ERISA), plan sponsors can protect themselves from liability for their employee’s investment decisions.
The guidelines for complying with Section 404(c) include informing your employees that they are responsible for the investment results of their directed accounts and providing them with:
Diversified Investment Choices
Employees must be given at least three choices with materially different risk/reward attributes.
Transfer Flexibility
Employees must have the ability to move their account balances from one investment option to another at least once quarterly (more often in the investment option is unstable).
Named Fiduciaries
Section 404(c) requires that the plan specify who is responsible for providing investment information to plan participants and who is responsible for receiving and processing participant investment direction
Notice of Intent to be a\Section 404(c) plan
The ERISA Section 404(c) regulation requires Notice be given to participants of the plan’s intent to have no liability for the results of participants directing the investments of their accounts.
Investment Information
Employees must receive adequate information to make informed investment decisions. This information includes:
Ø      A description of the investment alternatives available under the plan, including investment objective and risk and return characteristics.
Ø      A copy of the most recent full prospectus for each fund in which the participant invests (to be provided either immediately before or after a participant initially invests.)
Ø      An explanation of how and when participants may give investment instructions.
Ø      A description of any transaction fees and e expenses, including any commissions or sales loads, redemption or exchange fees.
Ø      Information about voting rights and who can exercise them.
Adhering to the regulations in Section 404(c) does not absolve the plan sponsors from liability. Responsibility for selecting and monitoring plan investments remains with the plan sponsor. To limit liability, a plan sponsor must comply with the specific requirements of 404(c).
bottom of page