The Employee Retirement Income Security Act of 1974 (ERISA) established new standards for transparency and management of privately-sponsored employee retirement plans. The Act was a response to multiple ill-managed funds where thousands lost their retirement benefits, most infamously the Studebaker collapse of 1963. In order to reduce pension instability, the Act required employees to be informed of certain details of their plans, contribute certain amounts, and work for a certain amount of time before claiming retirement benefits. Employers were required to have funding systems in place for supporting pension plans, and managers of the pensions became bound by new fiduciary duties. Also, ERISA created the Pension Benefit Guaranty Corporation (PBGC) which is a government agency that will ensure payments to employees for certain pension plans if the employer becomes insolvent.
[Last updated in June of 2021 by the Wex Definitions Team]