ERISA generally applies to any “employee benefit plan” established or maintained by an employer or a labor union. Whether a given benefit arrangement qualifies as a plan has been challenged on three grounds: transience, indefiniteness, or restricted coverage. ERISA applies only to plans that provide benefits to employees or their families, with the meaning of employee under ERISA tracking the common-law definition. The nature and intensity of ERISA’s regulation largely depends upon whether the plan provides retirement income or systematically defers compensation until termination of employment or beyond (a pension plan), or whether it provides any of certain other benefits specifically listed by the statute (a welfare plan). Finally, ERISA exempts from its coverage a few benefit arrangements that otherwise meet the statutory definition of an employee benefit plan. The most important exceptions are for unfunded executive deferred compensation programs (so-called top hat plans), and for plans sponsored by government or religious organizations.

ERISA regulates most benefit plans offered by private employers, both pension plans and welfare plans. Pension plans systematically defer compensation until termination of employment (or longer), and welfare plans provide other types of benefits designated by statute, of which health insurance is the most costly by far. Because of the importance of ensuring retirement income, health care, and other socially valuable welfare benefits (such as disability income and life insurance), the Code permits plans with certain features to “qualify” for favorable tax treatment, on the theory that such a subsidy encourages provision of benefits that would not otherwise be available. ERISA’s chief policy aims are to promote informed decision making by workers; to prevent mismanagement and abuse of plan assets by administrators; to protect worker reliance on the benefit promises made; and to preserve employer choice with regard to offering benefits and, provided that minimum standards are met, in tailoring benefit programs to serve the needs of the business.