The Employee Retirement Income Security Act (ERISA) is a piece of legislation passed by the United States government in 1974. It is designed to protect the pensions of individual employees when an employer offers a pension. ERISA legislation and its amendments also set forth certain protections regarding employees' health insurance and other employer-sponsored benefits.
The Employee Retirement Income Security Act does not require employers to provide a pension to employees, nor does it require employers to provide health insurance. Instead, it governs those employers who voluntarily offer these services, putting regulations on those employers that offer retirement and health benefits to individuals. The purpose of ERISA is to ensure that those employees who are counting on employee health insurance or pension plans are protected.
Under the rules of the Employee Retirement Income Security Act, employers who offer a pension must set a date at which that pension vests. In other words, if an employer offers a pension, the employer must mandate a number of years a person must work, after which his pension is guaranteed. When a pension vests, the employer is unable to reduce the amount of the employee's pension.
The investment and management of retirement funds is also regulated under the Act. Those managing pension funds are called ERISA fiduciaries. They have the obligation to invest the funds of a pension plan only in certain, safe investments and owe a duty to the employees to put their best interests first when it comes to the management of a pension fund.
Amendments to the Employee Retirement Income Security Act, including the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) and the Health Insurance Portability and Accountability Act of 1996 (HIPAA) also provide protections for employees who depend on employer-sponsored health insurance. These two regulations, like ERISA in general, do not mandate that an employer offer health coverage. Instead, they put rules in place on employers who do offer such benefits.
Under HIPAA, employers cannot discriminate against an employee when offering health insurance for a pre-existing condition. Although they can restrict coverage for conditions diagnosed in the six months prior to the employee signing up for the plan, they cannot restrict coverage for longstanding conditions, such as arthritis or diabetes, that an individual has had for a long period of time. Under COBRA, employers must permit employees who involuntarily lose their jobs, or who are laid off through no fault of their own, to keep their health coverage for up to 18 months.
