1 - Overview of ERISA

Summary

ERISA regulates most benefit plans offered by private employers, both pension plans and welfare plans. Pension plans systematically defer compensation until termination of employment (or longer), and welfare plans provide other types of benefits designated by statute, of which health insurance is the most costly by far. Because of the importance of ensuring retirement income, health care, and other socially valuable welfare benefits (such as disability income and life insurance), the Code permits plans with certain features to “qualify” for favorable tax treatment, on the theory that such a subsidy encourages provision of benefits that would not otherwise be available. ERISA’s chief policy aims are to promote informed decision making by workers; to prevent mismanagement and abuse of plan assets by administrators; to protect worker reliance on the benefit promises made; and to preserve employer choice with regard to offering benefits and, provided that minimum standards are met, in tailoring benefit programs to serve the needs of the business.