Learn which employers are subject to ERISA retirement plan rules. Most private sector plans must follow ERISA, but government employers and churches are exempt.
Table of Contents
Question
Which statement regarding the Employee Retirement Income Security Act (ERISA) is true?
Answer
Most private sector retirement plans are subject to ERISA guidelines. ERISA exempts only governmental employers (federal, state, and local governments) and churches.
Explanation
The statement “Most private sector retirement plans are subject to ERISA guidelines. ERISA exempts only governmental employers (federal, state, and local governments) and churches” is true.
The Employee Retirement Income Security Act (ERISA) is a federal law that sets minimum standards for most retirement and health plans in the private sector to protect plan participants and beneficiaries. ERISA requires plans to provide information about plan features and funding, establishes fiduciary responsibilities for those who manage and control plan assets, provides claim and appeal processes, and gives participants the right to sue for benefits and breaches of fiduciary duty.
However, ERISA specifically exempts two types of employers from its requirements:
- Governmental employers – This includes federal, state, and local governments. Retirement plans sponsored by government entities are not subject to ERISA.
- Churches and religious organizations – Retirement plans established and maintained by churches and qualified church-controlled organizations are also exempt from ERISA. However, church plans may opt to be covered by ERISA’s provisions if they choose.
All other private sector employers sponsoring retirement plans, such as 401(k) plans, defined benefit pension plans, profit sharing plans, etc. must adhere to ERISA’s rules and regulations. This is the majority of employer-sponsored retirement plans in the United States.
So in summary, the statement is accurate that most private sector plans are subject to ERISA, with only very limited exemptions for government employers and churches. Understanding which plans are covered by ERISA is important for HR professionals administering retirement benefits.
SHRM Senior Certified Professional (SHRM-SCP) certification exam practice question and answer (Q&A) dump with detail explanation and reference available free, helpful to pass the SHRM-SCP exam and earn SHRM-SCP certification.