Employer's Limited Involvement

[austin3515]

I had a prospective client ask if excluding everyone but HCE's from a 403b plan would automatically subject the plan to Title I of ERISA (the NHCE's are covered by the 401(k) Plan).

I'm assuming the answer is no, it does not subject them to Title I, because a 403b plan can have lots of exclusions (students, people w/ < 20 hours, etc). Simply allowing only eligible people to participate should not effect coverage.

Has this been addressed anywhere? To be honest, limiting eligiblity to people who work "less than 20 hours a week" would clearly involve more discretion than the completely objective HCE test.

[ETA Consulting LLC]

The exclusion of employees who are eligible to defer under another arrangement is a 'safe harbor' exclusion from the universal availability requirement for deferrals. This type of design wouldn't impact "employer involvement" for Title I purposes. You are correct that it would be treated like excluding employees who fail to meet the 20 hour per week requirement.

Good Luck!

[Peter Gulia]

ERISA section 4(a)(1) states: "[T]his title shall apply to any employee[-]benefit plan if it is established OR maintained by an[] employer[.]"

Even if the employer does not 'maintain' the plan, ERISA applies if the employer "established" the plan.

How does a plan specify which employees are excluded from the plan without the employer 'establishing' the plan?

Although a court should defer to 29 C.F.R. section 2510.3-2(f) to the extent that it is a plausible interpretation of an ambiguous statute, could a judge find that the employer's act of writing a document that involves a provision not required by the Internal Revenue Code (excluding people without a need to do so to get IRC 403(b) tax treatment) is a something that's not one of the six things recognized under the "sole involvement" interpretation?

And could a judge find that deciding which class of employees are eligible to participate 'establishes' what the plan is?

[ETA Consulting LLC]

Whether the employer is beyond "limited" involvment when it decides to establish a plan for those employees who are not covered under any other deferral arrangement is, arguably, the same as deciding whether to establish a plan at all. I say this because in 403(b) plans, ERISA status typically applies to the contract; even though the IRS's rules requiring the 403(b) to be written now qualifies it as a plan. With that said, you may establish a "deferral only plan" and a "plan with employer contributions"; and have ERISA status apply to only those contracts under the plan with employer contributions. The question is whether the employer has any involvment in the contract.

Good Luck!

[QDROphile]

I believe that after the new section 403(b) regulations there is no such thing as a non-ERISA 403(b) plan, nothwithstanding the disingenuous rationalizations by the Department of Labor in its field assistance bulletin. The most we can get from the FAB is that the DOL is not looking to expand its scope to pick up new plans -- it is not looking for more work or more trouble. That does not mean that the plans are not subject to ERISA.

The categorical exceptions still apply: governmental and church plans, for example..