In the past 10+ years, ADMIN Partners has worked with hundreds of retirement plans. With this experience in hand, we have been able to help navigate Plan Sponsors around the rules and requirements that come with ERISA. To this day, we continue to receive questions from Sponsors and Advisors regarding what subjects a 403(b) Plan to ERISA and the responsibilities that come with this label. In order to create a better understanding of ERISA, here is an inside look at what ERISA is, how a Plan becomes subject to ERISA and the responsibilities that come with the label.
WHAT IS ERISA?
The Employee Retirement Income Security Act of 1974 (ERISA) was established to protect retirement plan participants as well the investments that they contribute to their employer-sponsored retirement plan. This federal law was established to safeguard the interests of participants and beneficiaries by requiring the disclosure of all features & funding within the plan.
WHAT SUBJCTS A 403(b) PLAN TO ERISA?
While there are some 403(b) plans that are statutorily exempt from the rules and regulations of ERISA (public education, government, and most church plans), there are many plans who can become an ERISA Plan based on the following factors:
* Plans that are sponsored by private tax-exempt employers, and make decisions on behalf of the plan (vesting, employee exclusions, etc…) or receive compensation for performing administration.
* Retirement plans that opt to contribute an employer match as an added benefit to the participants of the plan.
* Employers that use a group arrangement for participant investments versus individual contracts.
Plans that are subject to ERISA hold annual obligations that are required in order to remain compliant. These requirements include the filing of a Form 5500 (along with additional schedules based on the scope of the plan) as well as nondiscrimination testing which ensures the plan does not discriminate against non-highly compensated employees. Depending on the size of the plan, the Plan Sponsor may also be required to have a formal audit conducted by a third party firm. This company can work with the plan’s TPA to ensure the information submitted during the filings to the IRS is accurate.
To learn more about ERISA and the responsibilities placed on the Plan Sponsor, contact ADMIN Partners directly at 877-484-4400.