ERISA: Employee Retirement Income Security Act (the "401ks" Act)

A major goal of the Nixon and Ford Administrations was to develop a new working partnership between the Federal Government and the States and localities — a partnership termed New Federalism. The broad philosophic underpinning, the unifying theme, was that of revenue sharing. This principle reflected the belief that "decisions are better made when they are made by those directly concerned"; that the Federal Government should supplement rather than supplant the capabilities and resources of local governments; and that local officials and citizens were willing and able to carry out their own responsibilities. The New Federalism sought to bring government closer to the people and to return a larger share of the nation's responsibilities and decision making to the states and localities. Revenue sharing would provide state and local governments the resources to carry out these responsibilities and to permit them substantial freedom and flexibility to tailor programs to local conditions and priorities.

The Employee Retirement Income Security Act of 1974 (ERISA) is major law to protect the financial security of American workers and their families assigned additional responsibilities to the Department in 1974. The Employee Retirement Income Security Act (ERISA) requires the Department to enforce fiduciary standards and reporting and disclosure requirements for well over one and one-half million employee benefit plans, so as to assure the exclusive use of plan funds for the benefit of participants and their beneficiaries.

ERISA provides that employees be included as plan participants at an early date and that liberal standards of vesting be met. These provisions help to guarantee workers future retirement benefits.

Private employee benefit plans now invest more than $210 billion in assets, which are to be used for future benefit payments. ERISA requires that fiduciaries prudently invest such funds; to diversify plan assets to minimize the risk of large losses; and to act in a manner solely in the interests of participants and their beneficiaries.

ERISA was set up with dual jurisdiction between the Internal Revenue Service, the newly created Pension Benefit Guaranty Corporation and the Department of Labor. There is some overlapping on reporting requirements and on the authority to grant exemptions between the IRS and the Department. Certain philosophic differences exist between the agencies on basic approach. The priorities of the IRS focus on tax code issues. In this area further coordination is needed.