The Employee Benefits Security Administration says tax-exempt employers can shut down a 403(b) plan and limit the number of investment options offered without subjecting the plan to the pension plan requirements in Title I of the Employee Retirement Income Security Act.
EBSA, an arm of the U.S. Department of Labor, has published that interpretation of the law in Field Assistance Bulletin 2007-02.
The bulletin deals with 403(b) tax-sheltered annuity plans.
In 1964, the Labor Department created “safe harbor” regulations that enable employers to keep ERISA Title I pension plan rules from applying to 403(b) plans. If employees are the sole source of a 403(b) plan’s funding, the plan can stay outside the scope of the ERISA pension plan rules, according to Robert Doyle, the EBSA official who wrote the field assistance bulletin.
Earlier this month, the department released new 403(b) regulations that make administration of 403(b) plans more flexible.