Employer didn't know it had an ERISA plan

[Guest mbg76]

Can anyone suggest a resource that would provide guidance on the steps to take when an employer discovers it has a plan covered by ERISA but only recently realized it. A client has been promising employees retirement income if the employees work until a certain age and have a certain number of years of service. The employer has kept its word and made these payments to employees who retire and meet the requirements. I've determined that this is a pension plan under ERISA, but the employer has never created or funded a trust or filed any 5500s.

[Kimberly S]

Since it is not possible to establish an ERISA plan without signing a written document, how could the employer not know it had a plan?

[Locust]

Kim - You don't need a written document to have an ERISA plan. Rather, if you have an ERISA plan, which I look at as a promise to employees that creates a reasonable expectation of benefits, you must put it into a written document. If you don't, you've violated ERISA. If you don't have a written document, it's harder to establish what the promise is and whether it was reasonable of the employees to expect the benefit, but if there is a promise, you still have the plan. L

[Kimberly S]

Locust, what about the ERISA 402(a)(1) requirement that a plan be in writing?

I agree that the verbal promise of a benefit could create a liability, but not a qualified plan under ERISA.

[jpod]

Not only does the client have an ERISA plan, it has an ERISA plan that is in violation of a ton of substantive requirements under parts 2, 3 and 4 of Title I of ERISA. This client needs experienced ERISA counsel, FAST.

[BeckyMiller]

The Courts are pretty firm that employer's cannot escape ERISA by simply making oral promises, rather than putting them in writing. See for example - Moeller v. Bertrang (DC SD, 8/24/92) 1469 or Hollingshead v. Burford Equipment Co. 747 FSupp. 1421, 1434 (M.D. Ala. 1990), 809 F. Supp. 906 (M.D. Ala. 1992).

[J Simmons]

Check out Guilbert v Gardner, #04-1003-cv, decided March 7, 2007, by the 2d Cir Ct of Appeals. In there, it is provided that (1) you can have a plan subject to ERISA even without a document (though not having one is a violation of an affirmative duty imposed by ERISA), but (2) mere promises to employees without implementation steps being taken by the employer to 'establish' the plan falls short of being an ERISA plan.

[wsp]

So then, in this instance, we are back to what JPOD suggested earlier when the recommendation to seek experienced ERISA counsel quickly was made. The promise was made and subsequent payments were made. Sounds to me like a plan was established and maintained albeit sans documents and filings.