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ERISA Terms All Employees Should Understand

On Behalf of | Jul 7, 2022 | Employee Benefits & ERISA

The Employee Retirement Income Security Act of 1974 (ERISA) offers protections for employee retirement plans and other employee benefits. If you work for a private company or business and participate in a pension plan, you probably are covered by ERISA’s protection.

Unfortunately, ERISA is a complicated statute that contains extensive retirement-related legalese that most people find difficult to comprehend. This makes it hard to know if your rights under ERISA have been violated. Learning some of these terms can help.

Plan Participant

Under ERISA, a “Plan Participant” is an employee or former employee, who is eligible to receive benefits from an employee benefit plan provided by an employer. “Beneficiaries” are those entitled to a benefit of the plan, and these oftentimes include family members of the plan participants.

Types of ERISA Plans

Defined Benefit Plan

A “Defined Benefit Plan” is one of the two types of retirement plans covered by ERISA. This type of plan specifies a monthly benefit received at retirement by participants and beneficiaries. The extent of the benefit varies and can either be an exact dollar amount or it may be a product of a calculation that considers factors such as salary.

Defined Contribution Plan

A “Defined Contribution Plan” has no specific amount provided at retirement. Rather, the plan is structured so that the participant or employer, or both, contribute a specific amount to the plan. The contributions are then invested, and the final amount received at retirement is determined by how well those investments did and the extent that their value decreased or increased. Plans such as 401(k) and 403(b) fall into this category.

Healthcare Plan

ERISA covers group health plans that are set up by employers to provide medical care protection for employees and other beneficiaries. These plans often come in the form of health insurance and ERISA offers protections regarding the management of these specific plans.

Normal Retirement Age

The “Normal Retirement Age” is when plans start paying retirement benefits. This typically occurs when the plan participant turns 65, but it can also refer to the 10th anniversary of the start of one’s plan participation if it were to be later than their 65th birthday. Sometimes plans may start paying out benefits earlier, which would be described in the plan document.

Normal Retirement Benefit

Generally, “normal retirement benefit” means the greater of the plan’s early retirement benefit or the benefit that commences at the normal retirement age. The meaning of this term can vary widely from one plan to another, so it is important to know how it is defined in your company’s Plan Document.

Party in Interest

As you might expect, this term refers to those persons and/or entities who are involved with your retirement plan. Examples of parties of interest include:

  • Any plan fiduciary
  • Any service provider to a plan
  • Employers
  • Plan Administrator
  • Stockholders
  • Employee Organizations

Essentially, it refers to anyone associated with your retirement plan, even your beneficiaries. The relationship between parties in interest and the plan are regulated by ERISA and certain transactions between these parties and the plan are prohibited.

Prohibited Transaction

This term seems self-explanatory and a “Prohibited Transaction” refers to transactions that are not allowed between a plan and parties in interest or fiduciaries. Prohibited transactions include exchanges of property, lending or extension of credit, and furnishing of goods or services.


The Consolidated Omnibus Budget Reconciliation Act (COBRA) is an ERISA amendment, which provides healthcare plan beneficiaries and participants with the option to continue with their employer’s group health plan even after certain events, such as job loss or a decrease in hours. More information about COBRA can be found here.

The Critical Takeaway

We hope this brief explanation of ERISA terminology will help you understand your rights under this important employee benefits law. If you would like to learn more about ERISA’s protections for participants and beneficiaries in employee retirement and health plans, we encourage you to read our other blog posts on this topic.

How do I find out if my ERISA rights have been violated?

Please call us at 844-696-7492 (toll-free) to learn more about your ERISA rights, or click here to submit your info.

Edelson Lechtzin LLP is a national class action law firm with offices in Pennsylvania and California. In addition to cases involving employee benefit plans our lawyers focus on class and collective litigation in cases alleging violations of the federal antitrust laws, securities and investment fraud, wage theft and unpaid overtime, consumer fraud, and dangerous and defective drugs and medical devices.