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Employee Retirement Income Security Act (ERISA): Exempt Plans

ERISA: Overview

The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that protects an individual’s right to benefits under employee welfare benefit plans and pension plans. However, not all plans fall under ERISA’s guidelines and protections.

What plans are exempt from ERISA?

The act specifically articulates plans not covered by ERISA. Plans that do not fall under ERISA include (i) governmental plans; (ii) church plans; (iii) plans maintained solely for the purpose of complying with workmen’s compensation, unemployment, or disability insurance laws; (iv) plans maintained outside the United States that primarily benefit nonresident aliens; and (v) unfunded excess benefit plans. The first two exemptions are explored further below.

What is a governmental plan?

ERISA defines a “governmental plan” as one established or maintained for employees by the United States Government, by the government of any State or political subdivision, or by any agency or instrumentality of either. This includes plans provided by the Railroad Retirement Act of 1935 or 1937; international organizations exempt from taxation under the International Organizations Immunities Act; and Indian tribal governments, including a subdivision or agency of an Indian tribal government.

Although the list appears to be straight forward and such a plan easy to recognize, there is often debate as to whether a plan is considered a governmental plan. When minds differ, the analysis hinges upon several factors. To determine whether a plan falls within this exception, it is important to examine the following factors:

  1. The degree of control the federal or state government exerts over daily operations;
  2. The law that created the organization or entity;
  3. The plan’s source of funding;
  4. The means by which the trustees and/or operating board is selected; and
  5. Whether other governmental units or entities consider the sponsoring organization’s employees to be government employees.

What is a church plan?

ERISA defines a “church plan” as one established and maintained for employees by a church or convention or association of churches that is tax exempt under §501 of the Internal Revenue Code of 1986. This applies to a plan maintained by an organization or entity whose principal purpose or function is to administer or fund a plan or program to benefit employees of a church or convention or association of churches, if it is controlled by or associated with a church or convention or association of churches. However, this exemption does not apply if the plan is established and maintained primarily for the benefit of employees who are employed by the church or convention or association of churches in connection with one or more unrelated trades and/or businesses.

If you feel your rights under ERISA have been violated, or if you have any other questions regarding your employment rights, please contact the experienced Birmingham employment law attorneys at Wrady Michel & King. You can contact us either online or by calling us at (205) 3199724. We are here to serve you!