ERISA - Employee Retirement Income and Security Act of 1974

ERISA has disclosure and reporting requirements:

  1. disclosure to participants and U.S. Department of Labor

  2. annual reports to IRS - strict reporting requirements - severe tax penalties for non-compliance

Pension benefit plan (if a company has a pension/retirement plan, it must make it available to any employee who works at least 1,000 hours in a 12-month period) - the plan must be funded - two main types:

  1. retirement pensions (defined benefit plans)

  2. deferred income plans (defined contribution plans)

Welfare benefit plan - no funding requirements - examples of "welfare benefits":

  1. medical/hospitalization benefits

  2. vacation and sick leave pay

  3. disability/death benefits

  4. unemployment benefits

  5. training/apprenticeship/scholarship programs

  6. prepaid legal services

  7. severance pay

    1. normally fits under welfare benefit plan as long as payments are not contingent upon retirement, total pay does not exceed twice the annual pay, and payments are completed within 24 months of termination

    2. exception: severance pay that is a one-time offer not routinely included in an employer's benefit plan; this type of payment is more akin to "wages in lieu of notice" (see below)

    3. Not included in welfare benefits: "payroll practices", on-site facilities, holiday gifts, sales to employees, and some group insurance programs

Payroll practices not covered by ERISA include:

  1. overtime pay

  2. shift premiums or differentials

  3. holiday and weekend premiums

  4. maternity leave pay paid out of general funds

  5. "payday" or wage payment laws - every state has a statute governing at least some aspects of the wage payment procedure - most laws impose a deadline for final pay, limitations on what an employer may deduct from wages and whether authorization for such deductions has to be in writing, and rules on how often particular types of employees must be paid

  6. severance pay/wages in lieu of notice

    1. severance pay: this is a post-termination payment that the employer has somehow previously obligated itself to give - it is usually, but not always, based upon a set formula such as length of prior service - it will delay unemployment benefits for the period covered thereby unless it results from a negotiated settlement of a claim or litigation, or was required under a negotiated contract

    2. wages in lieu of notice: this type of post-termination payment is something that the employer has never previously obligated itself to give - just like the name implies, it is given to make up for the lack of advance notice of termination - such a payment is usually not based upon length of service, but rather upon whatever arbitrary amount the employer deems appropriate at the time - this type of payment delays unemployment benefits for the period covered thereby

DOL has a useful FAQ document for retirement plans on its EBSA site: For information on enforcement of ERISA, see

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