What Is the Difference Between ERISA and Non-ERISA Plans?

A plan under the Employees Retirement Income Security Act of 1974 is subject to strict government oversight, and the act sets requirements for plan providers to protect employee interests, according to the U.S. Department of Labor. A plan not under the Employees Retirement Income Security Act is not subject to these investor protections, states Strategic Benefit Services. To legally offer these plans, organizations must be hands-off and allow employees to manage most plan functions.

The act covers a variety of retirement investment plans, including 401(k), profit-sharing, employee stock ownership, simplified employee pension, and savings incentive match plans, explains the U.S. Department of Labor. The act requires that all employers managing retirement plans always act for the benefit of the participants, and fiduciaries that fail to do so must compensate for losses or restore any improper gains. They must also eliminate unnecessary plan expenditures and provide claim and appeal processes for beneficiaries. A plan participant can sue for unpaid benefits and other breaches of a plan’s terms.

Non-profit organizations can implement plans that the act does not cover, to reduce additional reporting, audits and oversight, and to minimize costs, according to Strategic Benefit Services. There are strict requirements for employee non-involvement, and any unauthorized interference, such as disbursing plan loans, can result in penalties from the U.S. Department of Labor.