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A pension plan is a retirement plan that is usually tax free. An employer usually makes financial contributions that are set aside for the employee to benefit from in the future when he or she retires (Marlowe 1985).
The ERISA legislation which stands for the employee retirement income security Act is a law that specifies the lowest amount of standards for pension plans and also provides for general rules on the central income tax effects of businesses that contribute to the employee benefit plans. ERISA legislation applies only to private employers that have offered benefit plans to the employees. They do not, however, pertain to the privately acquired personal insurance or benefits (Witney, 2007).
ERISA safeguards funds from misappropriation and embezzlement and ensures that they are delivered at the best interest of an employee. It also ensures that no one is favored in the procurement and collecting of plan benefits. The ERISA legislation advocates for transparency and that the private company involved should be answerable to the federal government. Claims for a benefit plan by an individual should be worked on in a fair and judicious manner (Marlowe, 1985).
The ERISA legislation has specified various safeguards that help the employees to address the various obstacles that may arise from pension plan funding. These safeguards are that a company providing pensions should provide or involve the participants in the plans. This means that those to benefit from the pension plan should be well informed on it. Another safeguard is that the pension plan providers should be responsible. They should be able to control and manage funds for the pension plan well. The ERISA legislation also specifies that a plan provider should make a participant know his/her rights and that they should also provide an opportunity through which the grievances can be aired. The fourth safeguard is that it gives participants the right to seek legal action against plan providers for benefits. This means that a participant can sue the plan provider in case the terms are breached (Witney, 2007).
The pension protection act has added various necessities to the protection of these plans. Some of these requirements are that the companies which have put little funds in their pension plans ought to pay extra premiums to the Pension Benefit Guaranty Corporation. It also specifies that companies should scrutinize their pension plan responsibilities more perfectly. This closes dodges that would previously make companies underfund their pension plans by delaying payments. The pension protection plan also permits involuntary hand-outs to be given back to the employee’s tax free, if an employee goes for quitting within 90 days (Marlowe, 1985).
In conclusion, the ERISA legislation is of great benefit to the employees who are retiring. It ensures that they still reap from the hard work they committed themselves to. The pension safety act is of great benefit to the ERISA legislation. It enforces the plans that ERISA has put forth to protect participants of the pension plan (Witney, 2007).