The genesis of ERISA

The decades before the enactment of the Employee Retirement Income Security Act (ERISA) in 1974 were not a blank slate. U.S. tax law already provided favorable tax treatment for contributions to qualified pension and profit sharing plans, and pension trusts were required to be irrevocable so employers could not take a reversion of funds to be used for other purposes. But funding and reporting requirements were notably weak. 

These weaknesses came into the public view as a result of the infamous shut down of Studebaker's plant in South Bend, Indiana, and the resulting collapse of their pension plan in 1963. This was followed closely by the Central States Pension Fund fraud case involving Jimmy Hoffa in 1967. These events underscored the need for federal oversight to protect employee benefits and catalyzed bipartisan support for legislation. It still took about a decade for ERISA to become law, but it ultimately did on Labor Day of 1974. ERISA's primary aim was to establish federal funding standards for pension plans, set fiduciary standards for plan management, and enforce reporting and disclosure requirements to safeguard employee benefits.

Transformative impact on benefit plans

ERISA fundamentally transformed the landscape of employee benefit plans by introducing stringent federal standards that enhanced transparency, accountability and security. This legislation spurred the growth of diverse retirement and health benefit plans, including the rise of 401(k) plans and Individual Retirement Accounts (IRAs), which provided individuals with greater flexibility and control over their retirement savings. Additionally, ERISA's coverage of employer health and welfare benefit plans gradually increased as COBRA and HIPAA came into the law, and we saw the rise of individual savings accounts for health care, including health reimbursement accounts, flexible spending accounts, and ultimately health savings accounts. These developments were capped off by the groundbreaking Affordable Care Act (ACA) passed in 2010.