Frozen profit sharing trust still an ERISA plan

P/OPINION 75-16


                                                                3(2)


                        November 13, 1975


Dear              :

This is in reply to your inquiries concerning the coverage
of the            Profit Sharing Plan (Plan) under the
Employee Retirement Income Security Act of 1974 (ERISA),
which have been referred by our [city] Regional Office
for reply.

According to the information furnished by you, the Plan was
terminated in January, 1974, due to merger of two law firms.
At such time, the assets of the related trusts were fully
vested and frozen on behalf of the participants for pay out
upon their subsequent death, disability, retirement, or
other termination in accordance with the provisions
of the Plan. The Plan and related trust were qualified under
sections 401 and 501 of the Internal Revenue Code and the
trust continues so qualified. It is your view that the
frozen trust is not covered under the ERISA since there
was no “plan” in existence on or after the enactment of
the ERISA. Section 3(2) of the ERISA defines the term
“employee pension benefit plan” or “pension plan” to mean
any plan, fund or program which was heretofore or is
hereafter established or maintained by an employer or by an
employee organization, or by both, to the extent that by its
express terms or as a result of surrounding circumstances
such plans, fund, or program provides retirement income to
employees, or results in a deferral of income, by employees
for periods extending to the termination of covered employment
or beyond, regardless of the method of calculating the contri-
ibutions made to the plan, the method of calculating the
benefits under the plan or the method of distributing benefits
from the plan (emphasis added).

Based on the information in your letter the Plan has not
terminated; only future employer profit sharing contributions
have been terminated. The trust, which is part of the plan,
continues in operation and the trust assets are retained to
be paid to plan participants upon their subsequent death,
2

P/OPINION 75-16


disability, retirement, or other termination of service
with the employer. To the extent that each participant’s
profit share is not distributed or otherwise made available
to him until he terminates service with the employer,
there is a deferral of income with respect to each participant.
Thus, the frozen profit sharing trust constitutes an “employee
pension benefit plan” or “pension plan” within the meaning of
section 3(2) and is subject to Parts 1, 4 and 5 of Title I of
the ERISA.

We are enclosing a copy of a regulation that was published
in the Federal Register on August 15, 1975. Section 2520.104-3
thereof requires that a short form plan description consisting
of the first two pages of Form EBS-1 (without schedules A,B, and
C) and the signature page (item 3 only) should have been
filed with the Department by August 31, 1975. Late filing
of the short form plan description should be accompanied by
a brief explanation of the delay in filing.

A revised and simplified version of the EBS-1 was published
in the Federal Register of October 10, 1975, for comment.
It is expected that the final version of the EBS-1 will
be issued soon after the expiration of the comment period.
Section 2520.104-3 of the August 15 regulation requires plan
administrators to file the revised EBS-1 in full, as well
as a copy of the summary plan description, by May 30, 1976.
By the same date, a copy of the summary plan description
must be furnished to the plan participants and beneficiaries.

You also would like to know to what extent Title II of the
ERISA applies to this frozen trust. Title II is under
the jurisdiction of the Internal Revenue Service. A copy
of your November 14, 1974 letter and our reply is being sent to
                         Internal Revenue Service, for direct
reply to you.

Sincerely,