The Employee Retirement Income Security Act (ERISA) of 1974 set minimum pension plan standards for private industry.

Legal Matters

Retirement plans must provide participants with plan information on features and funding. Information must be furnished regularly and automatically to participants. Participants should be made aware of how long they must work before becoming eligible to contribute to the plan as well as the time period in which they can collect benefits from the plan. A certain portion of employees must be covered under the plan and all eligible employees must be given the option of joining. If an employee works for a certain amount of time, that employee earns non-forfeitable rights for receiving retirement pensions. Benefits cannot be weighted in order to benefit certain portions of the employees. Also, pensions must be paid to widows, widowers, or divorced spouses unless the plan has stated that they are not to receive the benefits.

Accountability

The controllers of these plans are held responsible for the funds which they manage. This covers not only those who control the monetary aspect of the plan, but also those who give management advice in relation to the plan. The law also protects participants in allowing grievances, appeals, and lawsuits to be filed in order to get promised benefits. If the plan is terminated, defined benefits must still be provided.

PBGC

The ERISA also created the Pension Benefit Guaranty Corporation (PBGC). This supports and encourages the growth of pension plans as well as keeping pension insurance premiums low. Employers pay the PBGC insurance premiums and in turn the PBGC provides benefits to those participants who have had their retirement accounts terminated without cause. This protects not only the employer, but also the employee.

Pension Termination

Pensions can be terminated by employers or their insurance company. An employer may voluntarily close their plan because they do not have enough money to pay all the benefits required. This is called a distress termination. Under a standard termination, the plan is required to have enough money to cover all benefits owed when it shuts down.