John Feldt ERPA CPC QPA

Dual Status, Government and 501(c)(3), pre-ERISA 403(b) plan

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A county government has dual status. Their "403(b)" was in place prior to ERISA. They provide matching contributions, but claim the 403(b) plan is a non-ERISA plan. Is there a grandfather rule that would allow a 403(b) to be non-ERISA even if employer contributions occur? Would it have to be established before ERISA was enacted?

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A government plan is not subject to ERISA.  No comment on whether or not the county can maintain a 403(b) plan.  Generally governments cannot, except for education institutions.  Perhaps there is a historical reason that allows the plan.

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plans sponsored by agencies, schools or instrumentalities of state, county or municipality are exempt from erisa.  these include hospitals, libraries, museums, etc.

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Yes, they are public institutions that are 403(b) eligible employers due to their 501(c)(3) status.  They have to meet certain requirements to enjoy this dual status.  They must not be an integral part of the government, and must not have significant enforcement, regulatory authority.

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Rev. Rul. 69-545, 1969-2 C.B. 117, is the ruling that permits a municipal hospital to have 501(c)(3) status.  If it does, it can have a 403(b) plan.  However, that doesn't mean it loses its governmental status.  And as a governmental plan, it is not subject to ERISA.

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Thanks Carol. 1969 ruling!

So they can have a government 457(b) plan covering everyone (or anyone) and a non-ERISA 403(b) plan with employer contributions.

Edited by John Feldt ERPA CPC QPA

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