401(k) Plan Offered to Unrelated Employers Is Not Multiple Employer Plan Under ERISA

Pension & Benefits Daily™ covers all major legislative, regulatory, legal, and industry developments in the area of employee benefits every business day, focusing on actions by Congress,...

A Section 401(k) plan maintained for employees of a limited-purpose corporation designed to operate the plan and for the employees of unrelated employers is not a single “multiple employer” plan, the Department of Labor said May 25 in ERISA Advisory Opinion 2012-04A.

The 401(k) plan described in the opinion letter was not sponsored by an employer or an employee organization, and the employers that participated in the plan had no “employment based common nexus or other genuine organizational relationship,” the department said.

The opinion letter was requested by Robert J. Toth Jr. of the Law Offices of Robert J. Toth Jr., Fort Wayne, Ind. The department said that, according to materials submitted with the request, the plan is intended to be a multiple employer 401(k) profit-sharing plan, administered by TAG Resources, a registered investment adviser. The limited-purpose corporation, 401(k) Advantage LLC, is the named fiduciary.

The letter said the plan's participation agreement describes the 500-plus participating employers as acting as employers but also being co-sponsors of the plan. According to the plan's 2010 Form 5500, the plan had more 9,800 participants and $63 million in net assets. Advantage signed the Form 5500 as the plan sponsor.

To be an employee pension benefit plan under Section 3(2) of the Employee Retirement Income Security Act, a plan must be established or maintained by an employer, an employee organization, or both, to provide benefits to employees, the department said. Advantage was not acting as an employer or as an employee organization, according to the letter. It found no employment-based common nexus between Advantage or TAG and the employers of the employees in the plan.

Association of Employers.

The letter said a single multiple employer plan to which more than one employer contributes may exist where “a cognizable group or association of employers, acting in the interest of its employer members, establishes a benefit program for the employees of member employers and exercises control of the amendment process, plan termination, and other similar functions on behalf of these members with respect to a trust established under the program.”

“There is nothing in your submission to support a conclusion that a bona fide association or group of employers is sponsoring the Advantage Plan,” the department said.

Although the submission requesting the guidance said there was no need for a bona fide employer group or association because employers signing the participation agreement were acting as co-sponsors of the plan, the department said that having unrelated employers sign identically worded documents was not enough to conclude the “employers have established or maintain a single plan for purposes of ERISA.”

The letter was signed by Susan Elizabeth Rees, chief of the division of coverage, reporting, and disclosure in the Employee Benefits Security Administration's Office of Regulations and Interpretations.


Text of the Advisory Opinion is at http://www.dol.gov/ebsa/regs/AOs/ao2012-04a.html.