South Carolina Life and Health Practice Exam

What is the primary purpose of ERISA?

1. To provide tax benefits for retirement accounts

2. To enhance protection for pension plan participants

3. To regulate health insurance premiums

4. To establish mandatory retirement ages

The correct answer is: To enhance protection for pension plan participants

The primary purpose of the Employee Retirement Income Security Act (ERISA) is to enhance protection for pension plan participants. ERISA sets standards for private industry pension plans and provides a framework that encompasses the reporting and disclosure of financial information to participants, as well as fiduciary responsibilities for plan managers. Its main goal is to safeguard employees' benefits from mismanagement and to ensure that they receive the benefits they have earned. ERISA also establishes participants' rights to know essential details about their plans, including funding, eligibility, and benefits. By providing these requirements, ERISA serves to instill a level of security and transparency that assures participants their pensions will be managed appropriately. This is crucial because pension plans are often a significant part of an individual's retirement savings and financial security. Therefore, the law plays a vital role in safeguarding employees' future income and welfare.