Every employer has multiple options, or plan types, from which to choose when establishing a plan.
However, not all plan types are available to all types of employers. Whether an employer is adopting a new plan, or validating a current one, it is important to be alert to employer eligibility requirements.
For most employers, the plan is either subject to the requirements of Title I of ERISA, or exempt from those requirements, depending on the type of employer. Plans maintained by private employers are generally subject to ERISA, with a handful of exceptions. Those exceptions include:
- Plans maintained by churches and qualifying affiliated or related organizations, unless the sponsor opts into the requirements of Title I;
- Certain self-employed plans (sometimes referred to as “HR-10” plans, a reference to past legislation governing these plans;
- Voluntary-only 403(b) plans maintained by private tax-exempt employers, provided that the level of employer involvement satisfies requirements established by the Department of Labor for these plans;
- Unfunded deferred compensation plans (though these plans may be subject to a one-time DOL filing)
Specific plan considerations
- 401(a) plans (excluding employee deferrals): These plans can be adopted by any employer. They can include either defined contribution or defined benefit plans, or both. Defined contribution 401(a) plans can include employer contributions, matching contributions, and if the employer is eligible (see next listing), they can include a 401(k) elective deferral option.
- 401(k) plans: These are elective deferral components of a 401(a) plan. They can be adopted as part of a 401(a) plan or as a stand-alone plan, and they can, if desired, include an employer matching contribution. They can be adopted by any private employer, and can be maintained by a public employer if it qualifies as a grandfathered plan (as of May 6, 1986).
- 403(b) plans: These can be adopted by any public school and by any organization that is tax exempt under Code section 501(c)(3) (generally, religious (such as churches) or charitable). It also can include public hospitals that are “dual status,” meaning that they qualify both as governmental and as tax-exempt under 501(c)(3).
- 415(m) plans (qualified governmental excess benefit arrangements): can be adopted by public employers for qualifying benefits or contributions that exceed the amounts allowable under Code section 415 (“section 415 limitations”).
- 457(b) plans: can be adopted by governmental employers, as funded plans, or by private tax-exempt employers, as unfunded plans. Employers eligible to establish or maintain 457(b) plans, whether funded or unfunded, also can establish 457(f) unfunded deferred compensation plans or arrangements.
- Other plans: Other plans that may be available to certain employers include Simplified Employee Pension plans (SEP plans) and Saving Incentive Match Plan for Employees (SIMPLE) funded