ERISA is a federal law that regulates employer-sponsored pension and welfare plans. It establishes minimum standards for plan participation, vesting, funding and fiduciary responsibility. Plan fiduciaries must act prudently and in the best interests of participants and beneficiaries.
The Department of Labor (DOL) and the Internal Revenue Service enforce ERISA through civil and criminal penalties. Plans covered include 401(k) and profit-sharing plans; some church and governmental plans are exempt.
Related questions
What is the QPAM exemption? The Qualified Professional Asset Manager (QPAM) exemption permits plans subject to ERISA to engage in certain transactions with parties-in-interest (such as brokers or counterparties) if the transaction is negotiated by a QPAM. A QPAM must be a registered investment adviser, bank or insurance company meeting specific net-worth and asset-management thresholds. Plans rely on this exemption to execute transactions that would otherwise be prohibited by ERISA’s self-dealing rules.
What is an Employee Stock Ownership Plan (ESOP)? An ESOP is a qualified retirement plan that invests primarily in the stock of the sponsoring employer. Employees become beneficial owners of company stock through allocations to their accounts. ESOPs allow companies to borrow funds to purchase stock and repay the loan with tax-deductible contributions. Unlike stock options, ESOPs provide employees with actual shares held in trust; participants receive distributions when they leave or retire.
What happens to digital assets when you die (ERISA context)? If digital assets (for example, cryptocurrency) are held within an ERISA-covered retirement plan, the plan’s terms and beneficiary designations govern distribution upon death. Plan fiduciaries must follow the plan document and ERISA’s rules regarding beneficiary elections. Digital assets held outside of ERISA plans are governed by state estate laws and the Revised Uniform Fiduciary Access to Digital Assets Act, which allows executors to access digital accounts with proper authorization. Including digital assets in an estate plan—naming beneficiaries, providing instructions for wallets and private keys—helps ensure proper transfer.
What are benefit plan investors? A benefit plan investor (BPI) includes any “employee benefit plan” subject to Part 4 of ERISA, an individual retirement account, or an entity whose equity interests are held more than 25 percent by such plans. Investment funds in which BPIs own 25 percent or more of any class of equity are themselves subject to ERISA’s fiduciary and prohibited-transaction rules. Fund sponsors often monitor the percentage of BPI ownership to stay below this threshold.
