Mighty ERISA is not, in the end, all-powerful — there are employee benefit plans it does not cover. Among them are 403(b) plans sponsored by non-profit employers. A recent blog entry discusses the fine line that employers with 403(b) plans can tread.
In “Non-ERISA 403(B) Plans Must Walk a Fine Line to Avoid Losing the ERISA Exemption,” a recent entry in The Retirement Plan Blog, Jerry Kalish revisits the matter in light of the U.S. Supreme Court’s ruling in Advocate Health Care Network v. Stapleton, in which the Court upheld church-affiliated pension plans’ exemption from ERISA. “Non-profit employers who sponsor 403(b) plans can choose to be exempt from ERISA,” he writes, adding, “But they have to tread carefully.”
Non-ERISA 403(b) plans, notes Kalish, are not subject to Title I of ERISA, which mandates certain reporting and disclosure requirements and imposes fiduciary responsibilities on those with discretion over plan management and assets.
For a 403(b) plan to be exempt from ERISA, the employees can only participate voluntarily and only the employee or beneficiary can enforce rights under the custodial account or annuity contract. In addition, the employer:
Kalish suggests that verification in writing from an ERISA attorney that a 403(b) plan meets relevant safe harbors, as well as annual reviews of the plan to make sure it is not exercising discretion over the plan and its assets, may be helpful. And he reminds that even if a plan is not subject to ERISA, it still must comply with the Internal Revenue Code as well as any fiduciary responsibilities state law may impose.
In “Non-ERISA 403(B) Plans Must Walk a Fine Line to Avoid Losing the ERISA Exemption,” a recent entry in The Retirement Plan Blog, Jerry Kalish revisits the matter in light of the U.S. Supreme Court’s ruling in Advocate Health Care Network v. Stapleton, in which the Court upheld church-affiliated pension plans’ exemption from ERISA. “Non-profit employers who sponsor 403(b) plans can choose to be exempt from ERISA,” he writes, adding, “But they have to tread carefully.”
Non-ERISA 403(b) plans, notes Kalish, are not subject to Title I of ERISA, which mandates certain reporting and disclosure requirements and imposes fiduciary responsibilities on those with discretion over plan management and assets.
For a 403(b) plan to be exempt from ERISA, the employees can only participate voluntarily and only the employee or beneficiary can enforce rights under the custodial account or annuity contract. In addition, the employer:
- does not make any contributions;
- receives no compensation except for a reasonable amount to cover expenses related to the employer’s contractual duties; and
- is only minimally involved with plan administration.
Kalish suggests that verification in writing from an ERISA attorney that a 403(b) plan meets relevant safe harbors, as well as annual reviews of the plan to make sure it is not exercising discretion over the plan and its assets, may be helpful. And he reminds that even if a plan is not subject to ERISA, it still must comply with the Internal Revenue Code as well as any fiduciary responsibilities state law may impose.
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