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Governing Documentation (Plan Documentation)  

Plans that are subject to Title I of ERISA are required to have a written plan, and in most cases those written plans consist of a single centralized document, with or without an accompanying adoption agreement.  These plans need to be sure to satisfy both Code and ERISA requirements.

Some newly assigned plan administrators may find that the plan does not have a centralized plan document.  Such an absence of a centralized document is not automatically an indication of a failure to satisfy the requirements of either ERISA or the Code.  In that case, however, it will be important to be able to confirm that all form requirements have been satisfied, and in that case many plan sponsors will adopt a centralized document (with or without an adoption agreement) on a prospective basis, and often in the form of a pre-approved document, in order to avoid future concerns regarding the form of the plan.

Many ERISA plans will incorporate the plan’s policies and procedures by reference, along with underlying investment arrangements.  As a general matter, while the plan cannot unilaterally alter the terms of the investment arrangements, it can and often does restrict the exercise of participant rights under the arrangement consistent with the terms of the plan.  In some plans, the underlying investment arrangements may include a number of the provisions required for the plan, in which case, apart from pointing to the written plan, the plan can (but is not required to) be silent on those provisions.

Specific Plan Considerations

  • 403(b) plans: Several unique considerations apply to these plans.
    • Although ERISA 403(b) plans have always been subject to an ERISA requirement to be maintained pursuant to a written plan, 403(b) plans generally first became subject to such a requirement under the final Treasury regulations issued in 2007.  Thus, until 2009/2010 many non-ERISA 403(b) plans did not have a written plan.
    • Additionally, as part of that regulatory transition, certain older 403(b) annuity contracts and custodial accounts were eligible for exclusion from the scope of the written plan under grandfathering or similar rules relating to Code and/or ERISA requirements.
    • Also as a part of that regulatory transition, the IRS issued model language that could be used by any 403(b) plan sponsors.  Public schools (including higher education) that used that language could obtain reliance for those portions of its written plan, much the same as if they had adopted a pre-approved plan.
    • Qualifying church plans that are not funded with a retirement income account (see “Eligible Investments”) are not required to have a written plan unless they affirmatively elect for Title I of ERISA to apply to the plan.
    • ERISA safe-harbor 403(b) plans maintained by private tax exempt plan sponsors can be exempt from ERISA provided that they satisfy key requirements for the safe-harbor.  Those key requirements generally include:
    • Limiting contributions to voluntary employee deferrals; and,
    • Limiting employer involvement in the plan, generally to those areas necessary for plan compliance.
    • While a written plan is generally permissible for these ERISA safe harbor plans, the level of employer control under such a document is generally very limited.  For example, such plans can permit the employer to design the plan and to provide factual information to the investment provider, it would not permit the employer to approve hardship withdrawals or make other similar discretionary determinations, or engage a third party other than the investment provider to do so, but rather would look to each investment provider to do so.
  • 457(b) Plans: The requirements for these plans are generally determined based on the type of employer.  Thus:
    • A public employer’s 457(b) plan must be a funded plan, and participants have considerable flexibility in taking their plan distributions once they qualify for distributions.
    • A private tax-exempt employer’s 457(b) plan must be an unfunded plan, with assets subject to the claims of the employer’s creditors.  However it can be funded with an arrangement intended to minimize the risk of the employer using the assets for other purposes (not including bankruptcy).  This arrangement is often referred to as a “rabbi trust,” having first been approved by the IRS in guidance issued to a rabbi.