Milestones in Employee Protections: Reflecting on ERISA's Legacy
ERISA Celebrates 50 Years
In the 50 years since ERISA was enacted, the landscape of employee protections has undergone significant transformations, driven by legislative advancements, evolving workplace dynamics, and the growing recognition of workers' rights.
Explore the full history of the growth of U.S. employee protections.
- 1921 & 1926 / The Revenue Acts of 1921 and 1926: Championed by Secretary of the Treasury Andrew Mellon, the Revenue Acts of 1921 and 1926 were designed to lift the country out of the financial mire caused by World War I. The laws addressed an enduring problem: balancing the nation's obligations with the demand for lowering taxes. 1921 saw corporate taxes increased from 10 to 12.5 percent; in 1926 corporate tax rates were raised to 13.5 percent while personal income taxes were reduced. The Revenue Act of 1926 exempts trust income coming from pension plans from an employee’s current taxable income. This act also established that pension plans must be established for the exclusive benefit of “some or all" employees
- 1935 / Social Security is enacted: Social Security is enacted, establishing age 65 as the normal retirement age. The 32-page act established a federally-run social insurance program for retired workers age 65 and older to provide a continuing income after retirement.
- 1942 / The Revenue Act of 1942: In 1939 only about five percent of American workers paid income tax. The United States' involvement in World War II changed that figure. The demands of war production put almost every American back to work, but the war's cost still exceeded tax revenue. President Roosevelt's Victory Tax (as the Revenue Act of 1942 came to be known) levied progressive taxes on nearly 75 percent of American workers. To ease workers' burden of paying a large sum once a year, and to create a regular flow of revenue into the U.S. Treasury, the government required employers to withhold money from employees' paychecks.
- 1956 / Treasury Regulation Section 1.401-1(b)(1)(i): IRS issues Treasury Regulation Section 1.401-1(b)(1)(i) which provides that a pension plan is “a plan established and maintained by an employer primarily to provide systematically for the payment of definitely determinable benefits to his employees over a period of years, usually for life, after retirement.”
- 1956 / Revenue Ruling 56-693: The IRS issues Revenue Ruling 56-693 which states that funds in a pension plan may not be made available until “any severance of employment (e.g. retirement, disability, or death)” because allowing a distribution before such time “is inconsistent with the accepted concept of a pension plan which meets all of the requirements of section 401(a) of the Code.” This Revenue Ruling (and subsequent Revenue Rulings) reinforces the IRS’ definition of retirement for pension plan purposes as a permanent termination of employment.
- 1956 / Social Security Act is amended: The Social Security Act is amended to allow women to elect early, reduced benefits at age 62, with full retirement benefits remaining available for women who retire at age 65.
- 1958 / Welfare and Pension Plans Disclosure Act (WPPDA): The Welfare and Pension Plans Disclosure Act (WPPDA) made the Department of Labor the chief regulator of employee benefits. A precursor to the Employee Retirement Income Secuirty Act, the law mandates that plan sponsors file plan descriptions and annual financial reports with the government. They also must make these materials available to plan participants and beneficiaries. This legislation was intended to provide employees with enough information to monitor their plans and prevent mismanagement and abuse of plan funds.
- 1961 / Social Security is amended: Social Security is amended to allow men to elect early, reduced benefits at age 62, with full retirement benefits remaining available to men who retire at age 65.
- 1961 / President's Committee on Corporate Pension Plans: It is said that President John F. Kennedy created the President's Committee on Corporate Pension Plans'- yet another ERISA forerunner '- because he realized how privileged he was to have superior health insurance while dealing with Addison's disease, a chronic adrenal insufficiency. You can read the report issued by the Committee online
- 1962 / PPDA Amendment: The WPPDA was amended in 1962, giving the U.S. Department of Labor interpretative and investigatory powers. Read the amendment here.
- 1963 / Studebaker Plant Closes: The pension reform movement gained momentum when the automaker Studebaker, closed its South Bend, Indiana, assembly plant in 1963. Its pension plan was so poorly funded that Studebaker could not pay benefits to all of its employees. 3,600 workers who had reached the retirement age of 60 received full pension benefits, The remaining 7,000 workers received no more than 15 percent of their pension's value, with nearly 3,000 of those workers receiving nothing at all.
- 1967 / Age Discrimination in Employment Act (ADEA): The Age Discrimination in Employment Act (ADEA) is enacted. It prohibits discrimination on the basis of age in employment for individuals who are age 40 and older and under the age of 65. ADEA does not prohibit discrimination against individuals over age 65 nor does it prohibit mandatory retirement.
- 1967 / The Grandfather of ERISA: Considered by many to be the grandfather of ERISA, Senator Jacob K. Javits proposes legislation in 1967 that addresses the funding, vesting, reporting, and disclosure issues identified by the JFK Presidential Committee.
- 1972 / NBC broadcasts "Pensions: The Broken Promise": This Peabody award-winning 1972 NBC News documentary by Edwin Newmann investigates abuses in the private pension system. It tells the stories of people who say their employers unfairly deprived them of their pensions\, bringing national attention to this increasingly devastating issue.
- 1974 / President Ford signs the Employee Retirement Income Security Act into law on Labor Day: ERISA is the culmination of a long line of legislation concerned with the labor and tax aspects of employee benefit plans. ERISA sets the minimum standards for retirement, health and other welfare benefits, today enforced by the Employee Benefits Security Administration. The administration of ERISA is divided among the U.S. Department of Labor, the Internal Revenue Service and the Pension Benefit Guaranty Corporation.
- 1978 / The Revenue Act of 1978: The Revenue Act of 1978 establishes qualified deferred compensation plans (Code Section 401(k) plans), which allow for pre-tax employee contributions to such plans (known as elective deferrals). Employees are permitted to withdraw their contributions from such plans after age 59 & ½, or upon separation from service (currently “severance from employment”), or because of hardship or disability.
- 1982 / Tax Equity and Fiscal Responsibility Act (TEFRA): TEFRA is a law passed in 1982 that was designed to reduce the federal budget deficit through a combination of tax increases, spending cuts, and tax reform measures. Often spoken about in combination with the Deficit Reeducation Act of 1984 (DEFRA) and The Retirement Equity Act of 1984 (REA).
- 1983 / Social Security is Amended: Retirement Age is set to raise the normal retirement age from 65 to 67 for those born after 1959.
- 1984 / Deficit Reeducation Act of 1984 (DEFRA): DEFRA changes 1982's TEFRA's required minimum distributions rules and extends suspension on cost-of-living increases for both maximum contributions and minimum benefits until 1988.
- 1984 / The Retirement Equity Act of 1984: The Retirement Equity Act amends ERISA in response to public concerns that working women did not receive their fair share of private pension benefits. Survivorship benefits, vesting and domestic relations orders are also addressed.
- 1985 / Consolidated Omnibus Reconciliation Act (COBRA): Signed by President Reagan on April 7, 1986, COBRA establishes rules for how and when continuation of health coverage must be offered and provided, how employees and their families may elect continuation coverage, and what circumstances justify terminating continuation coverage. Notably, it provides for the continuation of health care coverage for employees and their beneficiaries for a limited period of time if certain life events (like loss of employment or death of a covered employee) would otherwise result in a reduction in benefits. Read the bill in its entirety here.
- 1986 / Tax Reform Act (TRA’86): TRA '86 was a significant piece of legislation in the United States that made substantial changes to the tax code, including provisions affecting employee retirement plans. Key impacts on employee retirement include contribution limits, nondiscrimination rules, "top heavy" rules, vesting schedules, simplified employee pensions, and 401(k) plans. These changes were aimed at encouraging retirement savings, ensuring fairness in the distribution of retirement benefits, and providing greater security for employees' retirement funds.
- 1986 / Omnibus Budget Reconciliation Act of 1986: The Omnibus Budget Reconciliation Act of 1986 ends the proactive of employers limiting the ability of older workers who are new hires from participating in retirement plans. It also makes it illegal to freeze benefits for participants over age 65. Read an overview of the law here.
- 1986 / Pension and Welfare Benefits Administration (PWBA): Pension and Welfare Benefits Program became known as PWBA.
- 1986 / Federal Employees' Retirement System Act: Signed into law by President Reagan, this act applies to employees hired after December 31, 1983. This is a departure from the Civil Service system and requires employees to participate in Social Security. It also permits FERS participants to contribute up to 10 percent of their earnings, on a tax-deferred basis, to a thrift savings plan - similar to a 4011(k) - with partial matching by the Government.
- 1989 / The Omnibus Budget Reconciliation Act of 1989: Affecting both Federal and state unemployment compensation programs, the Omnibus Budget Reconciliation Act of 1989 excludes either employer-paid educational or legal expenses from being classified as "wages." Also excluded are certain Medicare refunds and money paid for dependent care assistance. Read the bill online here.
- 1990 / Older Workers Benefit Protection Act: The Older Workers Benefit Protection Act of 1990 amends ADEA to apply the law to employee benefits, codifies the equal-benefit-for-equal-cost principle, and establishes a series of minimum standards for waiver of rights under ADEA in early retirement situations.
- 1994-1997 / GUST:
- 1994: The first of 4 Acts that would eventually become known as GUST was established.
- 1994: Uruguay Round Agreements Act (URAA) included provisions that affected the operation of retirement plans, such as changes to the rules governing the taxation of distributions from retirement plans.
- 1995: General Agreement on Tariffs and Trade (GATT) amended. Introduced changes to the funding rules for defined benefit plans, including new mortality tables and interest rate assumptions
- 1996: Small Business Job Protection Act (SBJPA) made several significant changes, including; Simplifying the rules for 401(k) plans, increasing the compensation limit for retirement plan contributions, and introducing the SIMPLE IRA plan for small businesses.
- 1997: Tax Reform Act (TRA) provided tax relief and included provisions that affected retirement plans, such as changes to the rules for Roth IRAs and the introduction of the Saver's Credit.
- 1997 / Children's Health Insurance Program (CHIP): This program provides free or low-cost health coverage for more than 7 million children up to age 19. The legislation provides matching funds to states for health insurance to families with children and was designed to cover uninsured children in families with incomes that are modest but too high to qualify for Medicaid.
- 1998 / Women's Health and Cancer Rights Act of 1998: Also known as Janet's Law, this act protects patients who elect breast reconstruction after a mastectomy by mandating coverage for surgery and establishing a federal minimum requirement for post-operative stays in the hospital.
- 2001 / Economic Growth and Tax Relief Reconciliation Act (EGTRRA): EGTRRA introduced several significant changes to employee retirement plans aimed at enhancing retirement savings opportunities. Some key provisions are increased contribution limits, Catch-up contributions, Roth 401(k) and Roth 403(b) plans, Portability of plans, increased limits for defined contribution plans, enhanced vesting schedules, automatic enrollment and saver's credit.
- 2003 / Employee Benefits Security Administration (EBSA): Pension and Welfare Benefits Administration (PWBA) became EBSA
- 2006 / Pension Protection Act (PPA): PPA requires companies who have underfunded their pension plans to pay higher premiums to the Pension Benefit Guaranty Corporation (PBGC) and extends this requirement to companies that terminate their pension plans. The law also raises the cap on the amount employers are allowed to invest in their own plans.
- 2008 / Genetic Information Nondiscrimination Act (GINA): GINA prohibits group health plans and health insurers from denying coverage to a healthy individual or charging that person higher premiums based solely on a genetic predisposition to developing a disease in the future. Watch President Bush sign GINA into law.
- 2008 / Mental Health Parity and Addiction Equity Act (MHPAEA): The Mental Health Parity and Addiction Equity Act (MHPAEA) was signed into law as part of the Emergency Economic Stabilization Act of 2008. The MHPAEA primarily focuses on ensuring parity between mental health/substance use disorder (MH/SUD) benefits and medical/surgical benefits in health insurance plans.
- 2009 / Children's Health Insurance Program Reauthorization Act (CHIPRA): CHIPRA provides states with significant new funding, programmatic options and incentives for covering children through Medicaid and the Children's Health Insurance Program (CHIP).
- 2010 / Patient Protection and Affordable Care Act (ACA): The ACA is signed into law by President Obama on March 23, 2010. The law's many provisions include the creation of public healthcare marketplaces, and requirements that insurance companies cover all participants at the same rate regardless of pre-existing conditions or gender. Read about what the ACA means for you here.
- 2016 / The Fiduciary Rule is established: The Department of Labor's (DOL) 2016 Fiduciary Rule aimed to expand the definition of "fiduciary" under ERISA. This rule required financial advisors and brokers to act in the best interests of their clients when handling retirement accounts, ensuring that advice provided was free from conflicts of interest. The rule intended to protect consumers from biased financial advice that could result in higher fees and lower returns on retirement savings. Despite its initial implementation, the rule faced significant opposition and legal challenges, leading to its eventual vacatur by the Fifth Circuit Court of Appeals in 2018. As a result, the fiduciary standards reverted to the previous, less stringent requirements.
- 2016 / Mental Health Parity and Addiction Equity Act (MHPAEA) Amended and Clarified: These amendments and updates aimed to strengthen the implementation of MHPAEA, ensuring that individuals received equitable coverage for mental health and substance use disorder treatments compared to medical and surgical treatments.
- 2019 / Setting Every Community Up for Retirement Enhancement (SECURE) Act: The SECURE Act made significant changes to retirement plans by increasing the required minimum distribution (RMD) age from 70½ to 72 and allowing long-term, part-time employees to participate in 401(k) plans. It also eliminated the "stretch IRA" provision, requiring most non-spouse beneficiaries to withdraw inherited retirement account balances within 10 years.
- 2020 / The Coronavirus Aid, Relief, and Economic Security (CARES) Act: The CARES Act of 2020 provided several provisions to help individuals manage their retirement savings during the COVID-19 pandemic. Key impacts included allowing penalty-free withdrawals of up to $100,000 from retirement accounts for those affected by the pandemic, suspending required minimum distributions (RMDs) for 2020, and increasing loan limits from employer-sponsored retirement plans.
- 2020 / DOL Prohibited Transaction Exemption 2020-02: The DOL issued a new prohibited transaction exemption (PTE 2020-02) that allows investment advice fiduciaries to receive compensation for their services, provided they adhere to certain standards of conduct and disclosure requirements.
- 2021 / American Rescue Plan Act (ARPA): The ARPA’s primary focus was on providing economic relief in response to the COVID-19 pandemic it did include several provisions that indirectly impacted employee retirement plans, particularly through measures aimed at stabilizing pension plans and providing financial relief. Some key impacts include multiemployer pension plans, single employer pension plans, funding relief, interest rate stabilization, and temporary funding relief for community newspaper plans.
- 2022 / Securing a Strong Retirement Act of 2022 (SECURE 2.0 Act): Signed into law as part of the Consolidated Appropriations Act. This legislation built upon the original SECURE Act of 2019 and introduced several key changes to enhance retirement savings and access to retirement plans. Some of the significant provisions include increased required minimum distribution age, automatic enrollment and escalation, catch-up contributions, student loan matching, emergency savings accounts, part-time workers, small business incentives, and saver's credit.
- 2024 / Retirement Security Rule: The DOL released the Retirement Security Rule defining who is an investment advice fiduciary for purposes of ERISA. The DOL also released final amendments to class prohibited transaction exemptions available to investment advice fiduciaries "Improving Investment Advice for Workers & Retirees."
*at time of publication this rules effective date was put on hold.
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