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Which Retirement Accounts Does ERISA Cover?

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澳洲幸运5开奖号码历史查询:The Investopedia Team

Updated July 22, 2024

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Ebony Howard

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The Employee Retirement Income Security Act (ERISA) was passed ꧑in order to protect Americans' retirement savings plans. But do you know which ones? Let's test your knowledge. Which of the following accounts does ERISA cover?

A. 澳洲幸运5开奖号码历史查询:Individual retirement account (IRA)

B. State employee pension plan

C. Corporate pension plan

D. 澳洲幸运5开奖号码历史查询:Coverdell savings account

And the Answer Is...

The correct answer is "C." ERISA covers most 澳洲幸运5开奖号码历史查询:employer-sponsored retirement plans. But public employee plans, such as the state pension plan in answer "B," are exempt from coverage. As are IRAs, the "A" choice above. An individual retirement account is exempt from ERISA. As for choice "D," that was a bit tricky. A Coverdell savings account is a 澳洲幸运5开奖号码历史查询:college savings account, not a retirement plan.

Key Takeaways

Most employer-sponsored plans, such as 401(k)s, fall under ERISA.
Government employee plans are not covered by ERISA.
IRAs are not protected by ERISA, either.

Accounts Covered by ERISA

ERISA was enacted in 1974 to protect the retirement income of workers by holding the 澳洲幸运5开奖号码历史查询:fiduciaries of plans accountable to certain standards and rules.

Important

Retirement acc🎃ounts that qualify under ERISA are, in general, protected from cre🔯ditors.

ERISA can cover both defined-benefit plans and 澳洲幸运5开奖号码历史查询:defined-contribution plans. Common types of employer-sponsored retirement accounts that fall under ERISA include 澳洲幸运5开奖号码历史查询:401(k) plans, pensions, 澳洲幸运5开奖号码历史查询:deferred-compensation plans, and 澳洲幸运5开奖号码历史查询:profit-sharing plans.

ERISA does not cover retirement plans set up and administered by government entities and churches, such as many 403(b) plans.

In addition, ERISA laws don't apply to 澳洲幸运5开奖号码历史查询:simplified employee 🐻pension (SEP)♉ IRAs or other IRAs.

ERISA also covers some non-retirement accounts such as employee health and welfare benefit plans. Some common examples include 澳洲幸运5开奖号码历史🐼查询:health maintenance organization (HꦚMO) plans, 澳洲幸运5开奖号码历史查询:health reimbursement accounts (HR﷽As), 澳洲幸运5开奖号码历史查询:flexible spending accounts (FSAs), disability insurance, life insurance, and certain welfare benefit plans.

ERISA Requirements

Plans covered under ERISA are often referred to as 澳洲幸运5开奖号码历史查询:qualified plans. In order to qualify under ERISA, plan sponsors must meet a number of federal requirements regarding funding, vesting, participation, and the accrual of benefits.

Plan sponsors must also give detailed reports to the government. In addition, 🍒they are required to provide plan participants with documents detailing how the plan works and the benefits it offers.

The 澳洲幸运5开奖号码历史查询:Employee Benefits Secur🤪ity Administration, a unit of the 澳洲幸运5开奖号码历史查询:Department of Labor, oversees and administers ERISA.

ERISA Protections

In addition to keeping participants informed of their rights, ERISA also grants partici✱pants the right to sue for benefits and breaches of fiduciary duty.

To ensure that participants do not lose their retirement contributions if a defined plan is terminated, ERISA guarantees payment of certain benefits through a federal agency known as the 澳洲幸运5开奖号码历史查询:Pension Be💯nefit Guaranty Corporation.

If My Company Files for Bankruptcy, Do I Lose My Pension?

Not necessarily. You do not automatically lose your pension because your employer files for bankruptcy. Some employers will recover from bankruptcy with their pension plan in�🎉�tact.

Many private-sector pensions are covered by a federal agency called the Pension Benefit Guaranty Corporation (PBGC). The PBGC may take over your pension, including any survivor's or disability benefits. However, the PBGC may not match the same level of benefits that your employer had promised. Benefits are determined on a case-to-case basis. The PBGC will notify you of your estimated monthly benefit. Contact your plan administrator or the PBGC if you have any questions.

Which Plans Aren't Covered By ERISA?

ERISA doesn't cover:

Government plans
Church plans
Individual retirement accounts (IRAs)
Plans outside the U.S. for nonresident employees
Unfunded excess benefit plans
"Plans that are maintained solely to comply with applicable workers compensation, unemployment or disability laws," according to the U.S. Department of Labor.

What Is the Difference Between a Defined-Benefit Plan and a Defined-Contribution Plan?

A defined-benefit plan, more commonly known as a pension, guarantees a set payment in retirement based on several factors, including an employee's length of tenure at the company and salary. The employee and employer are notified of the formula that the payout depends on, so what the retiree receives won't necessarily come as a surprise. The typical pension is also guaranteed to provide payments to the retiree for the rest of their life. Sometimes the pension has 澳洲幸运5开奖号码历史查询:death benefits, as well. These benefits provide a payout to♒ the beneficiary that the retiree has designated.

A defined-contribution plan, such as a 401(k), does not guarantee a set payment in retirement, and the amount available in retirement is not based on a set formula. The available income in retirement is unknown. What is determined (or "defined") is how contributions may be made to the account: pretax, after-tax, or Roth.

The Bottom Line

ERISA was implemented to protect the retirement plan assets of workers. It covers most employer-sponsored plans in the private sector. If you are unsure whether or not 澳洲幸运5开奖号码历史查询:your plan qualifies under ERISA, contact your plan administrator.

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