Under ERISA, which statement correctly contrasts welfare and pension plans?

Under ERISA, which statement correctly contrasts welfare and pension plans?

• A. Welfare plans must be funded under the Pension Protection Act.
• B. Welfare plans cover health, life, disability benefits, while pension plans provide retirement income; they have different funding and testing rules.
• C. Both are exempt from any testing requirements.
• D. Pension plans are not subject to ERISA.

Answer: (B)

Under ERISA, welfare benefit plans and pension plans serve different purposes and are governed by different funding and testing requirements. Welfare plans cover non-retirement benefits such as health, life, and disability, while pension plans provide retirement income. Both types fall under ERISA, but pension plans—especially defined benefit plans—have specific funding standards and minimum funding requirements to ensure there are enough assets to pay promised benefits. Welfare plans generally do not follow these pension-specific funding rules, though they still carry ERISA duties like fiduciary responsibility and required reporting. The statement that welfare plans must be funded under the Pension Protection Act is not accurate because the PPA targets pension funding rules, not welfare plan funding. The idea that both types are exempt from testing is incorrect, since pension plans are subject to funding and other testing rules, while pension plans are clearly within ERISA. Pension plans are indeed subject to ERISA.

Under ERISA, welfare benefit plans and pension plans serve different purposes and are governed by different funding and testing requirements. Welfare plans cover non-retirement benefits such as health, life, and disability, while pension plans provide retirement income. Both types fall under ERISA, but pension plans—especially defined benefit plans—have specific funding standards and minimum funding requirements to ensure there are enough assets to pay promised benefits. Welfare plans generally do not follow these pension-specific funding rules, though they still carry ERISA duties like fiduciary responsibility and required reporting. The statement that welfare plans must be funded under the Pension Protection Act is not accurate because the PPA targets pension funding rules, not welfare plan funding. The idea that both types are exempt from testing is incorrect, since pension plans are subject to funding and other testing rules, while pension plans are clearly within ERISA. Pension plans are indeed subject to ERISA.