ERISA Basics
1974
Year Enacted
Foundation of benefits law
5
Fiduciary Duties
Loyalty, prudence, diversify, document, reasonable
SPD
The Doc
Summary Plan Description
five columns hold up the plan
The Fiduciary Five
Five duties hold up the plan. Knock any one out and the roof — participants' protection — collapses. Personal liability attaches to the fiduciary.
1. Loyalty
Solely in participants' interest
2. Prudence
Care of a prudent expert
3. Diversify
Spread plan investments
4. Follow Docs
Adhere to written terms
5. Reasonable
Plan expenses must be fair
the document a participant actually reads
The Required Disclosures
Four documents, four delivery rhythms. The SPD is the one the exam loves — it has to land within 90 days, written in plain English.
erisa § 102 · plain english
Summary Plan Description
deliver within 90 days of becoming a participant
average participant must understand it
Summary Annual Report (SAR)
AnnuallyFinancial summary for participants
Form 5500
Annually to DOLDetailed plan financials
Summary of Material Modifications
After plan changeNotice of any change
vesting caps
For DC plans: 6 years graded OR 3 years cliff — maximum.
Exam Traps
ERISA does NOT cover government plans
Federal, state, local government plans are exempt. Church plans are exempt with narrow exceptions. The exam tests scope.
Loyalty runs to PARTICIPANTS
Not to the employer. The fiduciary acts in the participants interest, even if it conflicts with the company's convenience.
SPD must be plain English
Written so the average participant can understand. Legalese-only SPDs can be challenged. Required within 90 days of becoming a participant.
ERISA preempts most state benefit laws
But state insurance regulation survives preemption. The line is fact-specific. The exam tests the basic preemption principle.
Loyalty to participants
Fiduciary duty runs to plan participants, not the employer. The exam tests this.
Government plans excluded
ERISA covers private-sector retirement and welfare plans. Government and most church plans are out.
Participants live in it. Their savings are pre-paid rent.
ERISA tells the manager how to run the building — five duties.
Run it for tenants, not the owner.
Hire good vendors, not friends.
Invest the building fund across many bonds, not one risky stock.
Stick to the lease terms. Do not improvise. Do not overpay yourself.
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