ERISA-DOL Reviews Whether A Retirement Benefit Arrangement Is A Single Employee Pension Benefit Plan

In Advisory Opinion 2012-03A, the U.S. Department of Labor (the “DOL”) faced the question of whether the NRP Plan, described below, constitutes a single “employee pension benefit plan” under section 3(2) of ERISA.

To take over abandoned retirement plans, National Retirement Plan, Inc. (“NRP”) will establish the NRP Plan, and will serve as both the plan sponsor and plan administrator. NRP intends to merge unrelated, abandoned, individual account plans into the NRP Plan and thereafter manage and administer the NRP Plan as an ongoing individual account retirement plan. Many abandoned plans’ records will not be complete and practical procedures will be needed to be developed to complete the mergers while protecting participant benefits. The participants in the NRP Plan will be able to elect to directly roll over the amounts in their accounts into individual retirement accounts (“IRAs”), take a distribution of those amounts (partial or total), or have their assets retained in the NRP Plan for investment and subsequent distribution. Participants who elect to remain in the NRP Plan will be able to direct the investment of their accounts among a diverse portfolio of investments.

The DOL said, to constitute a single “employee pension benefit plan” under section 3(2) of ERISA, the NRP Plan must be established or maintained by an “employer” within the meaning of section 3(5) of ERISA, by an “employee organization” within the meaning of section 3(4) of ERISA, or both.

Section 3(4) 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. The DOL said that NRP would not be an employee organization, as so defined, primarily because it does not exist for the purpose of dealing with employers, and it is not an employee beneficiary association because membership in the association must be limited to employees, and this would not be the case here.

Section 3(5) defines “employer”, in pertinent part, 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. NRP would not be an employer, as so defined, since it would not be acting as an employer with respect to the participants in the NRP Plan. There is no group or association acting for an employer that would serve as the employer for the NRP Plan.

As such, the DOL concluded that the NRP Plan does not constitute a single employee pension benefit plan under section 3(2) of ERISA. Rather, the NRP Plan should be treated as a collection of separate, albeit apparently abandoned, employee benefit plans.

Comment: This is basically the same issue and same conclusion as in Advisory Opinion 2012-04A (see blog of June 1). One consequence of the conclusion of “no single plan” is that a Form 5500 must be filed for each separate plan. That is a lot of 5500s, in these cases! Also, a separate plan with at least 100 participants will need an audit, and each plan must procure its own ERISA section 412 bond. Further, the existence of separate plans could lead to fiduciary responsibility under ERISA for persons, e.g., the employers, now treated as sponsoring and operating those plans.

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