ERISA Compliance – Series 7 Exam

ERISA Compliance – Series 7 Exam
Published on finra-exam-mastery.com

📘 Understanding ERISA for the Series 7 Exam
The Employee Retirement Income Security Act (ERISA) of 1974 is a key federal law governing private-sector retirement plans. On the Series 7 exam, you’ll need to understand how ERISA applies to retirement accounts and what rules broker-dealers must follow when working with these plans.

📚 Core Concepts of ERISA Covered on the Exam

✅ Plan Eligibility and Participation

• Employees must be allowed to participate in a qualified retirement plan if they are:
  • At least 21 years old
  • Have 1 year of service (1,000 hours minimum)

✅ Qualified vs. Non-Qualified Plans

• Qualified plans (e.g., 401(k), pension plans):
  • Follow ERISA rules
  • Offer tax-deferred growth
  • Require non-discrimination testing
• Non-qualified plans (e.g., deferred compensation):
  • Not ERISA-covered
  • Used for select employees or executives

✅ Fiduciary Responsibilities
Under ERISA Section 404(c), fiduciaries must:

• Act solely in the interest of plan participants
• Carry out duties prudently
• Diversify investments to minimize risk
• Follow the plan documents

✅ Prohibited Transactions
Fiduciaries cannot:

• Self-deal (act in their own interest)
• Receive compensation from plan providers
• Use plan assets for personal gain

✅ ERISA-Covered Plans Examples
✔️ 401(k)
✔️ Profit-sharing plans
✔️ Keogh (HR-10) plans
✔️ Defined benefit plans
❌ Not covered: IRAs, 403(b)s for public employees, government or church plans

💡 Common Exam Triggers

• Which accounts are subject to ERISA?
• What investment advice can a rep give to a plan sponsor?
• Who is the fiduciary in a qualified plan setting?
• What makes a plan “qualified” under IRS and ERISA rules?

🧠 Exam Tip
Always identify the fiduciary role in ERISA questions and ensure actions meet the “best interest of the participant” standard. ERISA-compliant plans must be non-discriminatory, fully documented, and properly administered.

🎯 Master ERISA and Retirement Compliance for Series 7
Understanding ERISA is key to passing suitability and regulation questions related to retirement plans. Stay sharp on fiduciary standards and compliance risks.

🔗 Find ERISA flashcards, mock questions, and guided reviews at finra-exam-mastery.com and prepare with confidence.