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Kelso's Strategy for Income Redistribution

A key provision of ERISA concerns vesting. Vesting gives an employee a legal right to receive pension benefits at some future date when he or she stops working. Before ERISA was enacted in 1974, some employees for companies who had worked as long as 30 years for a company received no pension benefits when their employment terminated because those benefits had not vested. ERISA established complex vesting rules. Generally, all employee contributions to pension plans vest immediately, and employee rights to employer pension plan contributions vest after five years of employment.

In an attempt to prevent the mismanagement of pension funds, ERISA has established rules on how they must be invested. For example, pension managers must be cautious in their investments and refrain from investing more than 10 percent of the fund in securities of the employer. ERISA also contains detailed record-keeping and reporting requirements.

The provisions of Title I of ERISA cover most private sector employee benefit plans. Employee benefit plans are voluntarily established and maintained by an employer, an employee organization, or jointly by one or more such employers and an employee organization. Pension plans (a type of employee benefit plan) are invariably established and maintained to provide retirement income or to defer income until termination of covered employment. Other employee benefit plans are called welfare plans and are established and maintained to provide health benefits, disability benefits, death benefits, prepaid legal services, vacation benefits, day care centers, scholarship funds, apprenticeship and training benefits, or other similar benefits.

- plans established or maintained by governmental entities

or churches for their employees

- plans which are maintained solely to comply with applicable workers compensation, unemployment or disability laws.

- plans maintained outside t...

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Kelso's Strategy for Income Redistribution. (1969, December 31). In Retrieved 18:29, July 20, 2017, from
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