Management profit sharing plan with broad eligibility

P/Opinion-76-100


                                                            3(2) ✓
                                                            201
                                                            301
                                                            401
                                                            403

                      November 15, 1976

Dear            :

Thank you for your letter dated May 27, 1976, requesting
reconsideration of coverage of the ( Named ) Management
Profit Sharing Plan (Plan) under the Employee Retirement
Income Security Act of 197 4 (ERISA). The Plan was adopted
by 14 ( Affiliated ) corporations. You were advised that
the Plan is covered under the ERISA.

According to Article 3 of the Amendments to the Plan, dated
April 25, 1972, supervisory personnel, executive staff per-
sonnel, department heads, and employees with three years'
service to the corporation or a sister corporation are eli-
gible to be participants in the Plan. Also, in Article 4
of the Amendments, there is listed a percentage of gross
profit to be allocated to non-supervisory qualifying
employees and office staff. Article 7 of the Plan (effect-
tive April 1, 1968) provides for the distribution of a
participant's account upon retirement, death or disability.

Section 3(2) of the ERISA defines an employee pension bene-
fit 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 its express terms or as a result of surrounding circum-
stances 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 from the plan."

Based on the above, it is concluded that the Plan is an
employee pension benefit plan within the meaning of section
3(2) of the ERISA and is covered under title I pursuant to
section 4(a). The Plan does not qualify for the exemptions
provided in sections 20l(2), 30l(a)(3) or 40l(a)(l) as an
unfunded plan maintained by an employer primarily for the
2

P/O-76-100

purpose of providing deferred compensation for a select
group of management or highly compensated employees because
the Plan is open to all employees with three years of ser-
vice to the corporation or a sister corporation. The Plan
is subject to the Reporting and Disclosure, Participation,
Vesting, and Fiduciary requirements of Title I but not to
the Minimum Funding Standard requirements. Section 30l(a)(8)
exempts an individual account plan from the Minimum Funding
Standard requirements. However, it will be required that a
trust be established pursuant to the provisions of Section
403(a) to hold the plan assets.

Sincerely,