Apr 19, 2010

Private Pension And Welfare Plans | Regulatory Environment of Employee Benefit Plans

Add a Note HerePre-ERISA
Add a Note HereBefore the enactment of the Employee Retirement Income Security Act (ERISA) on Labor Day 1974, only three principal statutes governed private pension plans: the Internal Revenue Code (IRC), the Federal Welfare and Pension Plans Disclosure Act of 1958 (WPPDA), and the Taft-Hartley Act, more formally known as the Labor Management Relations Act of 1947. The latter regulated collectively bargained multi-employer pension plans.
Add a Note HereAmendments to the Internal Revenue Code enacted in 1942 established standards for the design and operation of pension plans. The principal purposes were to prevent plans from discriminating or disproportionately benefiting one group of employees over another and to prevent plans from taking excessive or unjustified tax deductions. Until 1974, the Internal Revenue Service was not concerned with the actuarial soundness of plans.
Add a Note HereThe Federal Welfare and Pension Plans Disclosure Act was enacted to protect plan assets against fraudulent behavior by the plan administrator. The act mandated that, upon request, participants concerned with plan malpractice would be provided with information concerning the plan. If misuse or fraud were suspected, it was up to the participant to bring charges against the administrator. A significant amendment to the WPPDA was enacted in 1962. That amendment authorized the Department of Justice to bring appropriate legal action to protect plan participants' interests and authorized the Department of Labor to interpret and enforce the act. For the first time, the burden of plan asset protection was placed upon the government, rather than on the individual participants.

Add a Note HereEmployee Retirement Income Security Act of 1974 (ERISA)
Add a Note HereThe shift to government protection of participants' rights enacted in 1962 would carry through to ERISA. It reflected a concern for workers, which was confirmed by President John Kennedy in 1962 with the appointment of the Committee on Corporate Pension Funds and Other Retirement and Welfare Programs. That committee issued its report in 1965, concluding that private pension plans should continue as a major element in the nation's total retirement security program. The report advocated many changes in the breadth of private plan regulation.
Add a Note HereThe report received widespread attention and led to the introduction of a number of legislative proposals. Congress concluded that most plans were operated for the benefit of participants on a sound basis, but some were not. To solve this problem, Congress enacted ERISA to govern every aspect of private pension and welfare plans and require employers that sponsor plans to operate them in compliance with ERISA standards.


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Lucky Nona said...

Pension plans can provide a very good degree of flexibility in planning for your retirement in the future. For example some body may want to retire early perhaps a few years before the date that one would qualify for the state pension or indeed the reverse one may be working past the state retirement age and want to defer taking your personal pension for that very reason.
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