Non-ERISA 403(b) started automatic contributions

[Jeff Kirtner]

A non-ERISA 403(b) plan was amended to include an automatic contribution arrangement.

1. Does that amendment make the plan subject to ERISA?

2. If so, if the plan is amended to terminate the ACA, does the plan again become a non-ERISA plan?

[Patricia Neal Jensen]

1. Yes.  Control over the plan is key to causing the plan to be ERISA and Auto-Enroll is control.

2. No.  Once ERISA;  Always ERISA.

I am sure you would appreciate some back up to my responses.  I did not have time to look today but can do so later this week.  I am pretty confident that I am correct, though.  Sorry.  This seems a severe consequence for very little, but Non-ERISA plans are precarious and many do not seek competent counsel or advice before taking such action.

Patricia Neal Jensen

Patricia.Jensen@QBILLC.com

[Peter Gulia]

The preceding post describes that ERISA governs a plan that is "established or maintained" by an employer.

But, even if so established or maintained, ERISA does not govern a governmental plan.

Likewise, ERISA does not govern a church plan unless the plan affirmatively elects to be governed by ERISA.

Consider also that a plan someone assumed was not governed by ERISA was governed by ERISA.

[Patricia Neal Jensen]

Good points, Fiduciary Guidance.  He did not mention it being a governmental plan or a church plan so I assumed the sponsor was a nonprofit 501(c )(3).   (Probably should have articulated that assumption.)   Your last sentence is also true, but they are ERISA now!  When we are hired by a new client, I do not permit them to tell me they are/ were  Non-ERISA without a thorough examination of the facts.  Too dangerous as most think that employer contribution is the only rule.

PNJ

[Jeff Kirtner]

Thanks for your responses, much appreciated. The Plan is not a governmental plan. I should have included that information.

If you have authority for a pension plan being subject to the "once ERISA, always ERISA" rule I would love to hear it.  I've seen that rule for welfare plans but not pension plans. See, e.g., In re Stern, 346 F.3d 1036 (9th Cir. 2003). In Stern, a pension plan was originally subject to ERISA, but once only owners were covered, ERISA ceased to apply. Of course, that's different than whether a plan that was once "maintained" by an ERISA plan ceases to be maintained because participation is completely voluntary. I haven't seen a case in that context rule that ERISA ceases to apply.

 

[AMDG]

I have never seen any guidance that tells employers how to "shed" ERISA coverage, other than the 1978 transition guidance.  See DOL Reg. Sec. 2510.3-2(f) and the preamble.   Once a plan is "established and maintained," the employer is out of the safe harbor.

 

[Patricia Neal Jensen]

I agree.   The bias is clearly in favor of ERISA.