Need for a Trust

[Guest Donaldson]

Does anyone know the rules for when an employer must set up a trust for the following plans: (i) a self-funded medical plan, and (ii) vision and dental plans are paid for entirely by employees.

I know that ERISA has an exception and does not require a trust for plans that consist of insurance contracts or policies.

Thank you for any assistance.

[Ron Snyder]

I don't believe that an employer's self-funded health plan ever needs a trust.

And I believe that there is an exception in the DOL plan asset regulations that generally require employee contributions to retirement plans to be deposited promptly. You can review those regulations yourself. They are found at: http://www.dol.gov/ebsa/regs/fedreg/final/96_19791.pdf

While I believe in the use of trusts, they are not required and frequently do little good.

[Guest rfh3]

Advisory opinion 92-24a states that section 403(a) of Title I of ERISA generally requires that all plan assets be held in trust.

"The fact that a TPA may be engaged to administer the plan does not negate this requirement. For purposes of administration, a TPA may be given access to an account, e.g., to prepare and sign checks for the payment of insurance premiums or benefit claims. However, when the funds involved are plan assets, they must, absent an exception, be held in trust in order to satisfy the requirements of section 403(a)."

On June 2, 1992, the Department announced an interim enforcement policy providing temporary relief from the trust requirement for certain types of welfare plans that involve participant contributions. See Technical Release 92-1, 57 Fed. Reg. 23272 (copy enclosed). That relief pertained to situations where a salary reduction plan was implemented.