Question

ERISA (Pension Reform Act of 1974) provides guidance for which of the following?

1) accumulated benefit obligation
2) actual return on plan assets
3) minimum funding during the year
4) projected benefit obligations

Answer 1

ERISA provides guidelines for accumulated benefit obligation, minimum funding requirements, and projected benefit obligations of pension plans. It establishes standards for protection of pension benefits and mandates employer contributions to the Pension Benefit Guarantee Corporation.

Therefore, option 1 is correct.

Step-by-step explanation:

The Employee Retirement Income Security Act (ERISA) of 1974 provides guidance for various aspects of pension funds and employee benefit plans. Specifically, ERISA sets standards for the protection of participant's benefits in pension plans including accumulated benefit obligations, minimum funding requirements during the year, and projected benefit obligations. While ERISA is focused on defined benefit plans, there has been a notable shift towards defined contribution plans like 401(k)s and 403(b)s, where employers and employees contribute a fixed amount regularly. These plans offer tax deferral and portability advantages, protecting retirees from inflation costs that can affect traditional pensioners. Also, employers providing pensions are mandated to contribute to the Pension Benefit Guarantee Corporation ensuring some level of pension benefit if a company cannot fulfill its promises due to bankruptcy.