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ERISA vs Non-ERISA 403b plans


Guest william2
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Guest william2

I'm not sure if this has already been posted somewhere, but can someone please shed some light on the difference b/w ERISA and Non-ERISA 403b plans? Also can a Non ERISA plan be converted into a ERISA plan? what would be the draw backs if any?

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You need to look at the ERISA regulations 2510.3 - where it defines a pension plan. 403(b) plans that are not subject to ERISA are basically arrangements that are selected and controlled by the participant, not the employer. The employer's role is limited to facilitating the withholding from payroll and making the deposits. It is a pretty subjective standard.

The obvious difference relates to the ERISA reporting and disclosure rules. The subtle difference includes things like what court do you go to in the event of a problem, what are the bankruptcy protections, etc.

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Guest goldenchild

The complete cite is DOL reg 2510.3-2(f), which lists the things that a 403b plan sponsor can do and still not be subject to ERISA.

The main hook that makes a 403b plan subject to ERISA is whether the employer sponsoring the Plan makes contributions on behalf of participants- ie makes a matching contribution. If the employer makes a match, then the employer exceeds the level of involvement permitted in the DOL reg and the Plan is subject to ERISA.

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I think it would be fairly easy to convert a Non-ERISA to an ERISA. You just need to read the ERISA Reg. that others have listed below and violate it. The easiest way is to make employer contributions.

The more difficult question is can you convert an ERISA into a Non-ERISA. I'm looking for that answer. Unlike 401(k) Plans, you cannot make a distribution out of a 403(b) plan except in the event of separation, death, 59 1/2 etc. 403(b) doesn't have the provision like 401(k) plans that you can distribution on plan termination as long as no other plan is in place. So, the question I have is whether the employer assets can be distributed, leaving only the deferrals and the earnings thereon. Then, operate the remaining plan (or some transferree) in a manner that is consistent with the ERISA Reg. described in the thread below.

If the plan is an ERISA Plan, yes it does have to supply an SPD, file Form 5500, maintain a plan document, and be subject to the civil enforcement rules of ERISA. I think a very significant obligation is that the employer would be responsible for the selection and retention of the Plan investments.

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