Key Points
Employee Pension Benefit Plan Classification
The reporting and disclosure requirements for employers maintaining TSA plans hinge on a critical threshold question: does the plan fall within ERISA’s definition of an “employee pension benefit plan”?
TSA plans that qualify as employee pension benefit plans must be established with a written plan document that specifies:
- who is responsible for plan administration,
- how contributions are made, and
- how benefits are paid.
These plans must comply with the same complex reporting and disclosure requirements imposed by both the IRS and the Department of Labor on other qualified plans — including filing Form 5500, distributing summary plan descriptions (SPDs), providing summary annual reports, and maintaining participant benefit statements.
If the TSA plan is not classified as an employee pension benefit plan, the employer may follow simplified reporting and administrative procedures:
- No summary plan description needs to be filed with the DOL or distributed to participants.
- No written plan document is required.
- The employer must still provide a notice of rollover rights and distribution reports to employees.
| Plan Type | Written Document | Form 5500 | SPD Required | Distribution Reports |
|---|---|---|---|---|
| Full ERISA (employee pension benefit plan) | Yes | Yes | Yes | Yes |
| Simplified reporting (government or voluntary plans) | No | No | No | Yes |
Plans Exempt from Full ERISA Classification
Government plans — including TSA plans established by public educational institutions (state school districts, state colleges and universities) — are not employee pension benefit plans under ERISA. They automatically qualify for the simplified reporting and administrative procedures described above.
A TSA plan established by a private §501(c)(3) employer may also avoid full ERISA classification if it meets all four of the following conditions:
- Participation in the plan must be completely voluntary for employees — no employee may be required to participate.
- The employer may not make contributions to the plan and may not receive any compensation in connection with the plan, except to cover reasonable administrative expenses directly related to the salary reduction payroll function.
- The employer’s sole involvement is to permit plan sponsors (insurance companies, mutual fund companies, etc.) to publicize their products to employees — the employer facilitates access but does not manage or control the plan.
- The employer collects salary reduction contributions from employees and remits them to the appropriate plan sponsor — and that is the extent of the employer’s role.
To maintain the simplified reporting exemption, employers must meet one additional requirement: they must give employees a reasonable choice of investments and must not endorse any particular investment product, insurance company, mutual fund, or plan sponsor.
If an employer steers employees toward a specific product, recommends one sponsor over others, or negotiates preferred terms with a single carrier, the plan may lose its exemption from full ERISA classification — triggering the full suite of reporting, disclosure, and fiduciary obligations.