ERISA coverage for new plan for former employees only

If an employer wants to establish a new program to make lifetime payments to some former employees who retired long ago, would the program be considered an ERISA pension plan?

29 CFR §2510.3-3(b) says that the term "employee benefit plan" does not include a plan under which no employees are participants covered under the plan.  The definition of "employee" is "an individual employed by an employer".  At least one court has interpreted that language to mean that ERISA covers a plan only when the employer established it to provide benefits to at least some of its then-employees.  A few other courts have said former-employee-only plans are not ERISA plans based on the policy argument that the objective of ERISA is to ensure that workers get promised benefits upon retirement, especially since some of the promised benefits were in lieu of other compensation that workers may have received, and those objectives do not apply to such plans.

Is anyone aware of more definitive authority that could support (or contradict) the position that ERISA does not cover plans that are established to provide benefits to former employees only?

A more "definitive authority"?  ERISA is THE definitive legislation regarding qualified plans...

The statute—the Employee Retirement Income Security Act of 1974—is the source for the question EBspecialist asks. But the source that post cites, 29 C.F.R. § 2510.3-3, is not any part of the statute; it is an agency rule that interprets the statute about a particular point.

A court might defer to the interpretation of the statute expressed in the rule (if the court finds the statute is ambiguous, and that the rule is a permissible interpretation of the statute).

But the rule’s interpretation does not completely or precisely answer EBspecialist’s question: Is a plan that provides a pension or welfare benefit only to former employees (and never covered anyone when she was an employee) an ERISA-governed plan?

Depending on the exact nature and measure of the benefit the employer would provide and other facts and circumstances, there might be no one clearly settled (and nationally uniform) answer to that question.

EBspecialist, if your client wants a confident answer, there might be no shortcut; rather, you might continue your research to find all related decisions and interpretations, and use all the reasoning you find.

On 1/19/2022 at 3:57 PM, EBspecialist said:

The definition of "employee" is "an individual employed by an employer". 

Well, they were, once. The absence of the word "currently" could have been intentional.

On 1/19/2022 at 3:57 PM, EBspecialist said:

At least one court has interpreted that language to mean that ERISA covers a plan only when the employer established it to provide benefits to at least some of its then-employees.  A few other courts have said former-employee-only plans are not ERISA plans

If you want further input, you might want to provide citations to these cases.

On 1/19/2022 at 3:57 PM, EBspecialist said:

based on the policy argument that the objective of ERISA is to ensure that workers get promised benefits upon retirement

Well, they are retired now and getting their benefits would seem pretty important. If the cases say what you imply, EBspecialist, it would presumably be based on the notion that ERISA protects an employee's right to get what they've earned, and here the employees didn't earn it, so who cares. That policy-based argument would seem to me not the only one that could be made.

The cite EBspecialist may be referring to is the Supreme Court defined term “employee benefit plan” based on the Fort Halifax Packing Co. v. Coyne case in 1987.  Since that opinion the Second Circuit developed three nonexclusive factors to assist in determining if the employer’s undertaking involves the similar type of ongoing administration that is inherent in a plan, fund, or program.  Although this case related to severance benefits, the three factors are:  (1) whether the undertaking or obligation requires managerial discretion, (2) whether a reasonable employee would perceive an ongoing commitment by the employer to provide such benefits, and (3) whether the employer is required to analyze the circumstances of each employee’s termination separately.  
It would seem reasonable to conclude that if this new program to make lifetime payments to some former employees is a one-time arrangement where there is no ongoing administration (the benefit is funded with a single premium lifetime annuity) then it would not rise to the level of being an “employee benefit plan”.  Certainly an ERISA attorney should opine on this for certainty.

This is a question that the IRS would answer with little effort required on the part of the party asking ( and for free ). 

2 hours ago, DW said:

This is a question that the IRS would answer with little effort required on the part of the party asking ( and for free ). 

Can you elaborate?

5 hours ago, ErnieG said:

The cite EBspecialist may be referring to is the Supreme Court defined term “employee benefit plan” based on the Fort Halifax Packing Co. v. Coyne case in 1987.

ErnieG, that case, as you acknowledge in your further comments, does not turn at all on whether the covered individuals are current or former employees.

5 hours ago, ErnieG said:

It would seem reasonable to conclude that if this new program to make lifetime payments to some former employees is a one-time arrangement where there is no ongoing administration (the benefit is funded with a single premium lifetime annuity) then it would not rise to the level of being an “employee benefit plan”.  

Wait, what? A scheme to pay a bunch of folks with different life expectancies, beneficiaries, work histories, yada yada, does not involve ongoing administration? Maybe arguably no if the employer buys single premium annuities for everyone, but if the thing, whatever it is, would be an ERISA plan if single premium annuities were not used, then presumably it would be an ERISA plan (e.g. for fiduciary requirements of selecting carrier) until all the annuities had been purchased, and then it would be a terminated ERISA plan.

5 hours ago, ErnieG said:

Certainly an ERISA attorney should opine on this for certainty.

Or maybe they should ask an ERISA attorney to look into getting a DOL Advisory Opinion.

3 hours ago, DW said:

This is a question that the IRS would answer with little effort required on the part of the party asking ( and for free ). 

Nothing is free.

58 minutes ago, Mike Preston said:

Can you elaborate?

It might have some tax issues that could be addressed in a PLR, but clearly the issue that EBspecialist asked is a DOL issue, not IRS.

On 1/21/2022 at 7:16 PM, Luke Bailey said:

Nothing is free.

I should've been more clear. You can call or email the IRS and get an answer. It will be verbally given, and you won't have anything in writing that you can provide as proof, but if it's clearly not allowable, someone will tell you that and why. 

If having an answer in writing is essential because someone at the potential sponsor is really interested and they want to keep pushing, then it's not free. 

None of the above mentions the "magic" acronym: HCE.  

Is it cynical to wonder if these "former employees who retired long ago" might be, or would have been, HCEs?