Sole Owner and ERISA Plan

[SRM]

100% corporation owner and spouse participate in a DB Plan. Two other unrelated employees participate in DC Plan. Plans are aggregated for coverage and non discrimination.

There is concern that the DB plan is not covered by ERISA (and participants not afforded the antialienation protections of ERISA) since the plan doesn not benefit employees other than the 100% owner and spouse. Agreed?

If the child of the owner becomes a participant of the DB Plan (she is the only other employee of company besides owner, spouse and two unrelated employees), is the DB plan now covered by ERISA (and the participants afforded the antialienation protections of ERISA)?

A strict reading of ERISA Reg §2510.3-3 seems to indicate that only an individual owner and spouse are not considered employees for purposes of determining coverage under Title I of ERISA.

[Guest jdw]

Yes, adding a non-spouse participant will trigger ERISA requirements, including the anti-alienation provisions (and title I notices, 5500s, SPDs, etc.). I thnk there is an exception for PBGC coverage for owner only-plans, but 1563 attribution will not attribute owners stock to child if child is over 21, so adding child may also add PBGC requirements to plan unless child is a minor.

Once court case that discusses whether ERISA applies to a parent-child plan is Leckey v. Stefano, from the 3rd circuit.

[SRM]

Thanks for the confirmation and great case citation.