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The Employee Retirement Income Security Act (ERISA) is a piece of legislation passed by the United States government in 1974. It is designed to protect the pensions of individual employees when an employer offers a pension. ERISA legislation and its amendments also set forth certain protections regarding employees' health insurance and other employer-sponsored benefits.
The Employee Retirement Income Security Act does not require employers to provide a pension to employees, nor does it require employers to provide health insurance. Instead, it governs those employers who voluntarily offer these services, putting regulations on those employers that offer retirement and health benefits to individuals. The purpose of ERISA is to ensure that those employees who are counting on employee health insurance or pension plans are protected.
Under the rules of the Employee Retirement Income Security Act, employers who offer a pension must set a date at which that pension vests. In other words, if an employer offers a pension, the employer must mandate a number of years a person must work, after which his pension is guaranteed. When a pension vests, the employer is unable to reduce the amount of the employee's pension.
The investment and management of retirement funds is also regulated under the Employee Retirement Income Security Act. Those managing pension funds are called ERISA fiduciaries. They have the obligation to invest the funds of a pension plan only in certain, safe investments and owe a duty to the employees to put their best interests first when it comes to the management of a pension fund.
Amendments to the Employee Retirement Income Security Act, including the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) and the Health Insurance Portability and Accountability Act of 1996 (HIPAA) also provide protections for employees who depend on employer-sponsored health insurance. These two regulations, like ERISA in general, do not mandate that an employer offer health coverage. Instead, they put rules in place on employers who do offer such benefits.
Under HIPAA, employers cannot discriminate against an employee when offering health insurance for a pre-existing condition. Although they can restrict coverage for conditions diagnosed in the six months prior to the employee signing up for the plan, they cannot restrict coverage for longstanding conditions, such as arthritis or diabetes, that an individual has had for a long period of time. Under COBRA, employers must permit employees who involuntarily lose their jobs, or who are laid off through no fault of their own, to keep their health coverage for up to 18 months.
There is one thing I don't understand about the Employee Retirement Income Security Act of 1974.
If this act is supposed to protect vested pension plans, and they are regulated by safe investments, how do people end up losing everything in their retirement accounts?
I personally know more than one person who ended up losing everything their company had invested for them over the years.
If there are precautions and safety measures set up to protect this from happening, who is at fault?
It is very devastating to find out the security blanket you thought you had to retire on is not there. Even when you thought you were doing everything you needed to have the money set aside when you retired, only to find out it is gone.
Many times when a piece of legislation is passed like this, the amendments that are added later can be even more beneficial than the original legislation.
I think the HIPAA amendment is one example of this. This was not included in the original Employee Retirement Income Security Act of 1974, but added at a later date.
Even though it can get kind of annoying when you have to sign a HIPAA form every time you visit the doctor, this amendment has been very beneficial for my family.
I have an ongoing medical condition that is quite costly over the course of one year. If I change jobs for any reason, it is nice to know that I cannot be denied coverage because of this pre-existing condition.
This employee benefit plan gives me peace of mind knowing as long as I have health coverage, I will be covered for this condition.
My husband is fully invested in his companies pension plan. When we get his pension updates, it is interesting to see how the funds have grown over time.
I am glad there are precautions set up in the security act regarding how these funds can be invested. Even so, I know there can be a big difference in what is considered a safe investment.
Years ago when the economy was not so bad, I got a little frustrated at the slow rate of return his pension money brought. They have always invested very conservatively, and I thought he should have larger returns.
The advantage to that conservative investing is that when the economy really took a bad turn, his account actually went up instead of going down.
When I heard many people talking about how much they lost in their retirement account, I didn't feel so bad about the years of minimal returns.
I recently lost my job and was worried about what I was going to do for health benefits. I think amendments like COBRA to the employment retirement income security act can be beneficial, but it didn't help me out much in my case.
Because I lost my job, I had very little money coming in. The unemployment I received was not enough to cover my bills and there was no way I could afford the insurance payments to keep COBRA benefits.
I was fortunate enough to be able to find a job with health benefits in a short period of time. I know a lot of other people have not been as fortunate, and they have had to go without the health coverage.
Having the opportunity to continue coverage for 18 months is helpful, but if you can't afford the payments, you don't have anything to gain by it.