Unfunded management retirement program during plan transition

P/OPINION 75-48


                                                       4(b)✓
                                                       201
                                                       301
                                                       401

                        December 23, 1975

Dear              :

This is in reply to your letters of March 31, and April 28,
1975, requesting a ruling on behalf of the
(Company). You would like to know if the Company's unfunded
non-qualified retirement benefit program (Pension System)
is covered under the Employee Retirement Income Security
Act of 1974 (ERISA). The Pension System, in force for 74
years, is being replaced by a qualified profit-sharing
plan but the Company would like to continue the original
program for 23 older employees (out of a total of 14,000
employees) who will be retiring within 10 years and will
not have sufficient time under the profit-sharing plan
to obtain retirement benefits comparable to those they
would have received under the Pension System. You
state that these older employees whose profit-sharing plan
benefits will be supplemented by the Pension System
are management employees and their salaries range from
$19,286 to $67,992.

Section 3(2) of the ERISA defines an "employee pension
benefit plan" and a "pension plan" as "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 the express terms or as
a result of surrounding circumstances such plan, fund, or
program

           (A) provides retirement income to employees, or

           (B) 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 contributions
               made to the plan, the method of calculating
               the benefits under the plan or the method
               of distributing benefits under the plan."
2

P/OPINION 75-48



The Pension System does meet the definition of an
employee pension benefit plan and is covered under section
4(a) and not exempted under section 4(b). However, it
is exempted under sections 201(2), 301(a)(3), 401(a)(1)
and 4021(b)(6) on the basis that the plan is unfunded
and is maintained by an employer primarily for the purpose
of providing deferred compensation for a select group
of management or highly compensated employees.

The Pension System, therefore, would be subject only to
the Reporting and Disclosure and the Administration and
Enforcement provisions of the ERISA.

In regard to reporting and disclosure, regulations issued
on August 15, 1975 (40 Fed. Reg. 34526), a copy of which
is enclosed, provide for an alternative method of compliance
for unfunded or insured plans maintained by an employer
for a select group of management or highly compensated
employees. Such a plan may comply with the reporting and
disclosure requirements by filing a statement with the
Secretary of Labor in accordance with the provisions of
section 2520.104-23 and providing any plan documents requested
by the Secretary.

The Department of Labor has not published regulations defining
what constitutes a "select group of management of highly
compensated employees" within the contemplation of sections
203(2), 301(a)(3), and 401(a)(1) of the ERISA. Therefore,
this determination letter is issued subject to the possibility
of a regulation covering this area. However, in the event
a regulation should be published which would adversely affect
the conclusion reached herein, such regulation will not be
applied retroactively, but only prospectively.

Sincerely,