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ERISA-Exempt Benefit Plans
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The Employee Retirement Income Security Act imposes responsibilities on employers who offer benefit plans to their employees and provides certain rules and regulations concerning the administration of the plans. The rules that govern plans differ depending on the type of plan offered by the employer. Some plans, however, are not governed by ERISA and are called "exempt plans."
Governmental benefits plans are specifically exempted from ERISA application by the statute. The benefits plans of most non-governmental employers are governed by ERISA. In order for a benefits plan to be exempt from the requirements of ERISA, one or more of the following must be true: (1) the plan must be for the benefit of persons other than employees; (2) the plan must be administered by a government body or agency; (3) the plan is a church plan as defined by ERISA; or (4) the plan's sole purpose is to comply with a workers' compensation law or a state disability law. In addition, some plans in which employees voluntarily provide all contributions to a plan and employers provide nothing are exempt from ERISA.
At least one federal court has held that a governmental plan may not choose to be governed by ERISA. The case involved a firefighter who sued a city and the city's benefit plan administrator under ERISA. The court held that, although the plan explicitly stated that the plan was governed by ERISA, a non-federal governmental plan could not voluntarily submit itself to federal jurisdiction under ERISA, no matter the intention of the plan. The court noted that all federal jurisdiction is conferred by the United States Constitution or by Congress and concluded that parties could not waive a lack of subject matter jurisdiction when subject matter jurisdiction was not provided under federal statute. Accordingly, although governmental plans may reference ERISA--and in fact many do--while such references may constitute contractual obligations upon the employer or employee, they do not provide a cause of action under ERISA.
Conversely, the benefits plans of most non-governmental employers are governed by ERISA. Because ERISA preempts state law, meaning that state law does not apply to a plan that is governed by ERISA, unscrupulous insurance marketers had attempted to sell insurance plans to employers claiming that they are "ERISA plans" and are exempt from state insurance regulation. ERISA-governed plans, however, are established by employers for their employees or by unions for their union members. Copyright 2009 LexisNexis, a division of Reed Elsevier Inc.
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