50 Years of ERISA: Celebrating the Landmark Federal Law That Has Transformed How Americans Save for Retirement
On September 2, 1974, the Employee Retirement Income Security Act of 1974 (ERISA) was codified into our federal tax and labor laws. This landmark legislation revolutionized the management and regulation of employer-sponsored retirement plans, created Traditional IRAs that have provided incentives for all working Americans to save for retirement, and—with further legislative changes in the half-century since—has forever altered how Americans plan and save for retirement.
How fitting that we were able to celebrate ERISA’s golden anniversary at the Ascend conference in San Diego, California, in early September. In case you didn’t know, Ascend is the retirement industry’s most comprehensive education conference that focuses on important compliance issues, as well as industry trends and opportunities. Health and education savings plans are included, too. (If you weren’t able to make it, join us for Ascend in Orlando November 4-6).
ERISA has transformed our industry in many ways. It was enacted as a response to growing concerns over the security of workplace benefit plans. ERISA added numerous protections for such plans, including retirement and health plans, and a regulatory structure subject to federal law. It imposed funding requirements and established eligibility rules and fiduciary standards for plan sponsors to protect participants’ retirement assets. The Pension Benefit Guaranty Corporation (PBGC) was also created by this legislation. The administration of ERISA is divided among the PBGC, the Department of Labor (DOL), and the Internal Revenue Service (IRS).
ERISA led to the rise of 401(k) and other qualified retirement plans and IRAs. In fact, Traditional IRAs became available on January 1, 1975, because of ERISA. At the time, many workers had pension plans, but there were many more who were not covered by any type of employer-sponsored retirement plan. Social Security and personal savings were the only retirement saving options for many American workers. But because savings accounts didn’t offer tax benefits that would help individuals build up their retirement savings, Traditional IRAs were Congress’s solution.
Other significant retirement legislation has followed, including the Retirement Equity Act of 1984, the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), and the Pension Protection Act of 2006 (PPA), along with regulations that provided technical and tax-related interpretations of such legislation. ERISA, however, has done the most to lay the groundwork for tax-advantaged saving today and for the future.
The SECURE Act: Building on ERISA’s Legacy
The Setting Every Community Up for Retirement Enhancement (SECURE) Act, enacted in 2019, represents one of the most significant updates to retirement legislation in decades and builds upon ERISA’s legacy. This legislation, along with the SECURE 2.0 Act of 2022, are expected to bring further enhancements to retirement security. ERISA set the stage for a more secure and reliable retirement system and has had a profound effect on the retirement security of millions of Americans.
However, the work of ERISA is not complete. The retirement landscape continues to evolve. It’s crucial that ERISA and other related legislation, including the SECURE Act and the SECURE 2.0 Act, continue to adapt to meet the needs of today’s workforce. As we look to the future, the focus remains on expanding coverage, increasing savings, and ensuring that Americans have the resources they need for a secure retirement.
ERISA is not just history; at Ascensus, we live and breathe it every day. We help financial organizations better understand and adapt to changing industry regulations (Have you read about the final RMD regulations yet?) We provide you with the education and tools you need so you can explain these rules to your clients. Count on us for support that includes an extensive training curriculum, consulting service, forms and documents, and even complete IRA and HSA program administration support.
