Employee Benefits Flashcards
Employee Retirement Income Security Act
ERISA
Encourages, but does not require, a private ER to offer retirement benefits
Regulates pensions, as well as other EE benefit plans
Sets certain minimum standards in order for the ER to take tax deduction for the cost of the benefits
Types of Pension Plans
3
(1) Detailed Benefit Plan
(2) Defined Contribution Plan
(3) Hybrid Plan
Detailed Benefit Plan
Traditional Pension Plan
ER defines what benefit EE will get if EE works a
certain number of years for ER
ER responsible to invest money now in order to pay the defined benefits upon retirement
Defined Contribution Plan
ER defines what contribution it will make to a retirement account for EE
EE invests money within the retirement account and takes money out when retired
Ex: 401(k) plans
Hybrid Plan
Combines elements of defined benefit and defined contribution plans
EEs may have individual accounts, but ER may promise to bear some of investment risk and/or arrange for group annuitization of some benefits of the plan
Vesting Standards
for Defined Benefit Plan
(1) Upon completion of 5 YEARS of service; or
(2) Incrementally with with at least 20% vesting after and an increase by same amount each additional year, with full vesting after 7 YEARS
Vesting Standards
for Defined Contribution Plan
(1) Complete vesting after 3 YEARS of service; or
(2) Incremental vesting beginning with at least 20% after 2 years, and the percentage must increase by same amount after each additional year of service, with full vesting after SIX YEARS
Health Benefits
Patient Protection and Affordable Car Act (PPACA) requires that ERs with 50 or more full-time equivalent EEs must provide health insurance to their EEs and dependents or pay a fee assessed by the IRS.
Life Insurance
ER may pay the cost of group life insurance coverage for its EEs at no or reduced tax consequences to the EEs
General Rules for Employee Benefit Plans
(1) In writing;
(2) Name at least one fiduciary responsible for it; and
(3) Plan description for covered participants
Anti-Alienation Prohibition
EE’s benefits cannot be attached by creditors or alienated to someone else
Protection from Discrimination
EE cannot be discriminated against for trying to receive benefits under ERISA
Exclusions from ERISA
Does not apply to:
(1) Plan for federal, state, or local governmental EEs;
(2) Plan established by a church; or
(3) Plan maintained solely for purposes of complying with workers’ compensation, unemployment compensation, or disability insurance laws
