What are some typical rules for pension plans?


Quick Answer

Rules regarding pension plans include requirements to inform participants of all important information regarding the plans, guarantees of certain payments upon termination, and rules on when a participant becomes fully vested, says FindLaw. The Employee Retirement Income Security Act, or ERISA, dictates most regulations regarding U.S. pension plans.

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Full Answer

ERISA requires that plans offer information to participants regularly and automatically and requires accountability of the plan's fiduciaries, according to FindLaw. The law defines a plan's fiduciaries as any entity that has authority over the plan or provides investment advice. The law may hold fiduciaries responsible for losses if they do not adhere to regulations. ERISA grants participants the right to sue for breaches of fiduciary duty and sets guarantees for the payments of certain benefits if the company terminates the plan.

Rules concerning when an employee becomes fully vested, or has earned nonforfeitable rights to an employer's contribution to a retirement plan, vary according to the type of vesting option, reports FindLaw. Under one schedule, workers are fully vested after five years of service. Under a graduated schedule, participants are 20 percent vested after two years of service and then vested an additional 20 percent for each year of service until they are fully vested after six years. Aside from the articles in ERISA, the U.S. Department of Labor has established other regulations about pension plans that include mandates about such things as plans that permit participants to guide investments.

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