In Advisory Opinion 2012-04A, the U.S. Department of Labor (the “DOL”) dealt with the issue of whether a certain retirement savings program constitutes a single “employee pension benefit plan”, within the meaning of section 3(2) of ERISA, despite participation by multiple unrelated employers.
In the Opinion , the DOL reviewed the 401(k) Advantage LLC 401(k) Plan (the “Plan”). The Plan is operated and maintained by 401(k) Advantage LLC (“Advantage”), and is advised by TAG Resources LLC (“TAG”), a registered investment advisor. The Plan is intended to be a single “multiple employer” 401(k) profit-sharing plan, which covers employees of Advantage and other unrelated employers that adopt the Plan (there are currently 500 such employers). TAG is the “plan administrator”, within the meaning of ERISA section 3(16), of the Plan. Advantage is the plan sponsor and named fiduciary. Advantage has the authority to amend the Plan. Advantage and TAG may, at any time, terminate the participation of any particular adopting employer. As named fiduciary, Advantage assumes the risk and liability associated with being a trustee, and removes every adopting employer from the liability associated with that role.
In analyzing the issue, the DOL said that, to be a single “employee pension benefit plan”, under ERISA section 3(2), the Plan must be established or maintained by an “employer” within the meaning of ERISA section 3(5), an “employee organization” within the meaning of ERISA section 3(4), or both. In turn section 3(5) of ERISA defines “employer” as any person acting directly as an employer, or indirectly in the interest of an employer, in relation to an employee benefit plan; and includes a group or association of employers acting for an employer in such capacity. Section 3(4) of ERISA defines “employee organization”, in pertinent part, as any labor union or any organization of any kind in which employees participate and which exists for the purpose, in whole or in part, of dealing with employers concerning an employee benefit plan, or other matters incidental to employment relationships; or any employees’ beneficiary association organized for the purpose in whole or in part, of establishing such a plan.
In this case, based on the information provided to the DOL, the DOL concluded that neither Advantage or TAG, or any other entity such as an adopting employer, is an employer or employee organization, as so defined. In particular, Advantage and TAG are not acting like employers with respect to the employees of the adopting employers, and therefore do not fit the definition of employer in section 3(5). The adopting employers have no relationship to each other, except for this arrangement to provide retirement savings for their employees. On that point, the DOL said that where-as here- several unrelated employers merely execute identically worded trust agreements or similar documents as a means to fund or provide benefits to their employees, in the absence of any genuine organizational relationship between the employers, no employer group or association exists for purposes of ERISA section 3(5).
As such, the DOL concluded that the Plan is not a single employee pension benefit plan for purposes of ERISA. Rather, it is an individual plan of each adopting employer.