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Choosing between an ERISA or non-ERISA plan

On Behalf of | Apr 5, 2022 | Uncategorized |

The Employee Retirement Income Security Act (ERISA) is a federal law that sets nationwide regulations on how employers have to provide private retirement plans to employees. ERISA defines the requirements for providing information to participants and setting minimum standards for participation. Pennsylvania employers are required to decide whether an ERISA or non-ERISA plan is the ideal choice for their workforce.

ERISA benefits

The purpose of ERISA is to protect the interests of employers and employees who participate in retirement benefits plans. Participants are required to disclose information about the plan to each beneficiary and establish standards of conduct for participants.

The ERISA law protects employees whose retirement funds could be mishandled. Providers of ERISA plans are legally required to hold their plans to the highest standards and act in the best interests of their participants.

Non-ERISA benefits

Employers have to consider the key advantages of a non-ERISA or 403(b) plan. This plan allows employees to have money automatically deposited into a personal retirement account. Participants do not have to meet all of the ERISA requirements including providing a Summary Plan Description, a Form 5500 and other documents to participants.

Employers have a great deal of flexibility in determining eligibility for their employees to participate in the plan. In addition, employers with more than 100 participants are not required to undergo annual audits for their plans.

Choosing ERISA or non-ERISA plans

Participants in both ERISA and non-ERISA plans are required to comply with federal regulations. The requirements that apply to ERISA plans are not guaranteed to apply to non-ERISA plans. It’s important for providers of retirement plans to understand the benefits of each type of plan.

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