(b)lines Ask the Experts – Can Governmental 403(b)s Elect to Be ERISA Plans?

“I realize that governmental plan sponsors are exempt from Employee Retirement Income Security Act (ERISA) coverage. But can governmental plan sponsors voluntarily elect to be covered under ERISA?” 

Michael A. Webb, vice president, Cammack Retirement Group, answered: 

This is an excellent question, as there is often confusion in this area. CHURCH plans CAN elect ERISA coverage, but the same is NOT true for governmental plans. Governmental plans are never, ever, ever subject to ERISA. This is even true if they elect to follow every single provision of ERISA, intentionally or unintentionally, as there is no way a governmental plan can “ERISAfy” itself.  

Of course, a governmental plan must still meet the definition for one under the Internal Revenue Code and ERISA, and with the Internal Revenue Service (IRS) having published a draft of possible future proposed regulations on the governmental plan definition, there could be some future changes that affect whether some entities meet the definition or not.

However, the inability of a governmental plan to elect ERISA coverage should NOT be confused with an inability to voluntarily follow ERISA provisions as if it were an ERISA plan. Most governmental plans, unless state law precludes it, are free to follow any or all provisions of ERISA. However, as addressed in a previous Ask the Experts column, for some governmental entities, it may be more problematic to follow ERISA provisions than for others.

NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.