On Labor Day fifty years ago, September 2, 1974, President Ford signed the Employee Retirement Income Security Act of 1974 (ERISA) into law. It is a combination of tax and labor law incorporating trust law like fiduciary standards with respect to pensions and health benefits.
Brought about after pension defaults from companies like Studebaker, ERISA has been steadily and consistently amended to accommodate new benefit structures and realities. The acronyms of these updates may be familiar to many: COBRA, HIPAA, ACA, and SECURE.[1] These are complimented by alphabet soup of regulators: DOL, IRS, PBGC, and HHS.[2] DOL describes ERISA as a “federal law that sets minimum standards for most voluntarily established retirement and health plans in private industry to provide protection for individuals in these plans.”[3] ERISA does not apply to plans established or maintained outside of the United States, by governmental entities, churches for their employees, or plans which are maintained solely to comply with applicable workers compensation, unemployment or disability laws.
Baby boomers and some of Generation X pre-date ERISA, while some of us have never known a world without ERISA, and still others may not yet be old enough to be employed. Regardless of your demographic or employment status, there is a good chance that ERISA has impacted your life. Perhaps you were born being covered by a parent’s ERISA group health plan. You might be willingly or unwillingly between jobs and relying on COBRA for health coverage. Or maybe you receive a default spousal annuity from the PBGC as a widower whose spouse’s employer no longer exists. In addition to 153 million workers receiving ERISA covered benefits, servicing these benefit plans also provides work to many actuaries, brokers, investment advisers, recordkeepers, accountants, bankers, attorneys, human resource professionals and more. Additionally, maybe you own or manage an employer that offers retirement and health plans.
Wherever you fall on the ERISA fandom spectrum between “why does it have to be so complicated to offer my employees savings” to “I guess it’s nice to keep my employer matching contributions” to “I would not have a job but for servicing these plans,” ERISA’s impact on the American workforce has been profound. The next fifty years could easily see a continued shift away from employment-based benefits to individual benefits like IRAs or HSAs, but for now it’s worth knowing the ins and outs of ERISA (or at least who you could contact in a pinch). An ERISA attorney can help employers navigate benefit offerings or assist financial institutions to create and service such offerings.
[1] Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), Affordable Care Act (“ACA”), and Setting Every Community Up for Retirement Enhancement Act of 2019 (“SECURE”).
[2] United States Department of Labor (“DOL”), Internal Revenue Service (“IRS”), Pension Benefit Guaranty Corporation (“PBGC”), and United States Department of Health and Human Services (“HHS”).
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