How ERISA [1] applies to securities professionals, such as RIAs and registered broker-dealers, who advise, manage, or trade for investment portfolios [2] of employee benefit plans, by Richard K. Matta of Groom Law Group.
The law broadly known as ERISA [3] comprises a number of provisions of the Internal Revenue Code (the “Code”), the Federal labor laws, and other Federal laws. Except for the prohibited transaction rules of the Code, which fall mainly under the jurisdiction of the Department of Labor [4] (“DOL”) and closely parallel the prohibitions in the labor provisions of ERISA, the Code provisions mainly govern the tax-qualification of plans and are beyond the scope of this discussion.
The provisions of ERISA of greatest concern to RIAs and broker-dealers are the labor law fiduciary [5] requirements contained in Title I of ERISA. These can be broadly divided into five major categories:
- Coverage and definitions
- Reporting and disclosure
- General fiduciary obligations, including co-fiduciary principles
- Prohibited transactions
- Enforcement, including bonding requirements
Each of these areas is discussed in detail in the article.