Escheat laws with non-qualified plans

[Guest lsh]

Are non-qualified plans subject to state escheat laws? I was thinking that since the plan assets are not protected, and are subject to creditors, that unclaimed benefits could be infact subject to state escheat laws.

Thanks!

[mbozek]

Yes and no. Yes if the non qualifiied plan has property payable to an employee (depending on whether state law regards non qualified plan benefits as property subject to Escheat laws). No, if the plan is subject to ERISA, e.g., a top hat plan, because state laws are preempted by ERISA. Amounts payable from an unfunded excess benefit plan could be subject to state law because such plans are exempt from ERISA.

[Guest lsh]

What makes a non-qual plan subject to ERISA?

I thought it may be based on if the plan was funded or not. But Panel Nonqual Def Comp Answer Book, indicated that a top-hat plan is by definistion unfunded, and is exempt from ERISA's participation, vesting, funding, & fiduciary requirements in ERISA section 201(2), 301(a)(3) and 401(a)(1), but not exempt from reporting and disclosure requirements. Funded excess benefit plans will not qualify for exemption of all Title I of ERISA, Parts 2 & 3 are exempt Parts 1 & 4 are not.

So should I conclude, if any part of the non-qual plan is subject to ERISA then escheat laws would not apply? Only plans that are completely not subject to ERISA could be subject to state escheat laws, as defined by each state.

The question is in reference to a lost employee's benefit in a non-qual plan.

Thanks again for your comments!

[mbozek]

Unless otherwise exempted from ERISA any plan for employees that provides for a deferral of income until retirement or termination of employment is a pension plan subject to ERISA. Excess benefit plans are exempt from ERISA. Unfunded Top hat plans are exempt from all ERISA requirements except reporting and the claims procedure provisions. However a top hat plan can file a simple notice with the DOL that meets all reporting requirements. Since a top hat plan is subject to ERISA, state laws are preempted.

[TCWalker]

I'm agreeing with mbozek, but if you're doing this research read ERISA Section 4, Title I before you get to Part 1. This is where ERISA covered plans are discussed, and I'm not sure you'll find the reference in the Panel Answer Book. Also, the preemption discussion is in Part 5, Section 514 if I'll recall correctly. Happy reading.

[Guest lsh]

Thank-you for your comments and cite references!!!!