Apr 25, 2010

Title I: Protection of Employee Benefit Rights

Title I of ERISA placed primary jurisdiction over reporting, disclosure, and fiduciary matters in the Department of Labor. The Department of the Treasury is given primary jurisdiction over participation, vesting, and funding. During the first years of ERISA, this "dual jurisdiction" led to a number of problems, which were addressed in 1979 by Reorganization Plan Number 4, discussed later in this chapter. As a result of reorganizations and administrative experience under ERISA, many requirements have been adjusted, resulting in a reduction of the regulatory burden.

Add a Note HereReporting and Disclosure
Add a Note HerePlan sponsors are required to provide plan participants with summary plan descriptions and benefit statements for the plan. Participants also are provided access to the plan's financial information. These documents are to be written in "plain English" so they can be easily understood.
Add a Note HerePlan sponsors file an annual financial report (Form 5500 series) with the IRS through the Employee Benefit Security Administration (EBSA), which is made available to other agencies. In addition, sponsors must file amendments when modifications to the plan are made. Taken together, these provisions seek to ensure that the government has accurate information on employer-sponsored plans.
Add a Note HereFiduciary Requirements
Add a Note HerePlan sponsors are subject to an ERISA fiduciary standard mandating the plan be operated solely for the benefit of plan participants. The fiduciary standard, or "prudent man standard," requires the plan fiduciary perform duties solely in the interest of plan participants with the care a prudent person acting under like circumstances would use. This means any person who exercises discretion in the management and maintenance of the plan or in the investment of the plan assets must do so in the interest of the plan participants and beneficiaries, in accordance with the plan documents, and in a manner that minimizes the risk of loss to the participant. The standard applies to plan sponsors, trustees, and co-fiduciaries, as well as to investment advisers with discretionary authority over the purchase and sale of plan securities.
Add a Note HereUnderlying the standard, are prohibitions against business or investment transactions between the plan and fiduciaries or interested parties.
Add a Note HereUpon violation of the prohibitions, the fiduciary may be held personally liable to the plan for any misuse, fraud, or mismanagement. Exemptions can be applied for when parties feel that actions are not to the detriment of the plan and its participants and should be allowed. Both the IRS and the Department of Labor are responsible for enforcing the fiduciary standards. The Department of Labor may file charges on behalf of the participants if the fiduciary has breached or violated the standards imposed by ERISA. The IRS may fine the employer and revoke the plan's favorable tax treatment. Both civil and criminal actions may arise from violations.


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