Finance: What is ERISA?

What is ERISA? The Employee Retirement Income Security Act (ERISA) of 1974 essentially codifies all of the rules and laws that pertain to the management of pension funds. These laws were designed to protect rank and file members and ensure that their pension funds were invested only in qualified, investment grade vehicles with minimal risk. ERISA was legislated due to infamous scandals over Teamster pension funds being associated with casino loans and organized crime.

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Transcript

00:27

standards or guidelines for pension plans in the United States and believe

00:31

it or not before this act companies essentially did not have to disclose to

00:36

their employees how well or poorly their pension investments had been doing all

00:40

along the way sort of a hidden set of numbers until well one day the [pension papers going into a filing cabinet]

00:44

beneficiary retired and was more or less cashed out well here's what you got good [older guy casting a fishing rod]

00:49

luck have fun in your two and a half years of expected lifetime after [$50 check passing hands]

00:52

retirement weirdly pension funds were actually

00:55

managed by the corporation that made whoopee cushions or whatever they made

00:59

because of course it assumed that if it was great at making whoopee cushions [whoopie cushions in a production line]

01:03

well then it would also be great at buying and selling stocks in the global [stock floating across world map]

01:08

stock market marketplace yeah not so much

01:11

so specifically ERISA codified or structured the way in which pension

01:16

funds are created and managed in the United States it made them voluntary

01:20

that is you are no longer forced to save money in a structure in which the [money going into piggy bank]

01:25

company managed your retirement savings and by the same token it did away with

01:29

the government's requirements formerly of the company having to have pension [gov't mandated pension plan paper getting ripped]

01:34

funds in the first place like they didn't need them anymore wasn't a

01:37

requirement additionally the features benefits and the whole notion of

01:40

fairness in terms of how the pension fund monies were earned retained vested

01:45

into and then distributed well it all had to be written down yes that was like

01:49

a new thing back then in a rational logical way so that employees would not [guy writing in binder]

01:53

end up being screwed under the yoke of unscrupulous managers in a lousy company

01:58

ERISA only exists for corporations that is it's not something that government

02:03

uses nor religious organizations nor other structured health things like

02:07

workers comp unemployment or disability insurance and all of this only works if

02:12

you and your they are in the good ol US of A there is [US map with whoopie cushion business man]

02:15

in fact a Somalian corporate retirement plan but we're pretty sure you wouldn't

02:20

like it