Employee Retirement Income Security Act ( ERISA)

The Employee Retirement Income Security Act (ERISA) is a federal statute managed by agencies like the Department of Labor and IRS. It sets standards for employers offering retirement or benefit plans, imposing fiduciary duties such as loyalty and care. ERISA covers defined benefit and contribution plans, requiring plans to be funded adequately and detailing vesting schedules. Employers must also pay premiums to the Pension Benefit Guarantee Corporation to protect against pension fund losses, ensuring employees receive promised benefits.

What is the primary role of ERISA in relation to employers who offer benefit plans?

• To manage employee retirement funds directly

• To mandate that all employers provide benefit plans

• To set standards for employers who choose to offer benefit plans

• To provide tax benefits to employers

Which of the following is a characteristic of a defined benefit plan?

• The plan is funded solely by employee contributions

• The employee decides the investment strategy

• The employer guarantees a specific retirement benefit amount

• The benefits are determined by the stock market performance

What is a key feature of a defined contribution plan?

• The employer guarantees a fixed benefit upon retirement

• The employee contributes to an investment account like a 401(k)

• The plan is only available to government employees

• The benefits are predetermined regardless of contributions

What does ERISA require employers to do to protect employee benefits?

• Provide free financial advice to employees

• Pay premiums to the Pension Benefit Guarantee Corporation

• Invest in high-risk stocks

• Offer health insurance to all employees

How does ERISA ensure that employees receive their promised benefits?

• By allowing employees to manage their own retirement funds

• By requiring employers to maintain a certain funding level

• By providing government subsidies to employers

• By mandating that all employees receive the same benefits