Get Our Blog
  • Eric Hahn

Non-ERISA 403(b) plans must walk a fine line to avoid losing the ERISA exemption

Last month’s Supreme Court decision, Advocate Health Care Network v. Stapleton, upholding ERISA exemption for church-affiliated pension plans was a reminder that not all benefit plans are subject to ERISA. Indeed, non-profit employers who sponsor 403(b) plans can choose to be exempt from ERISA. But they have to tread carefully.

Why take this path?

Very simply, a non-ERISA 403(b) plan would not be subject to Title I of ERISA which among other provisions mandates certain reporting and disclosure requirements and imposes fiduciary responsibilities for those who have discretion over plan management and assets.

Thus, a 403(b) plan if a non-ERISA plan:

  • Would not file Form 5500 and related schedules including the audit requirement if over 100 or more participants;

  • Need not distribute a Summary Plan Description to participants; and

  • Would be exempt from ERISA’s strict fiduciary requirements.

How does a 403(b) plan become non-ERISA?

Very carefully.

The Department of Labor (“DOL”) has, however, provided guidance or safe harbors in two publications, Field Assistance Bulletin 2009-02 and Field Assistance Bulletin 2010-01summarized as follows:

  1. Employees must participate in the 403(b) on a voluntary basis.

  2. Only the employee or beneficiary can enforce rights under the annuity contract or custodial account.

  3. The employer makes no contribution.

  4. The employer receives no compensation except for a reasonable amount to cover expenses related to employer’s duties under the contracts.

  5. The employer has only minimal involvement with the administration of the plan, e.g., limited to depositing employee contributions, allowing vendors to explain their products, and providing investment choices.

How could a non-ERISA 403(b) plan subject itself to ERISA?

Sometimes discretion inadvertently or unknowingly finds itself in the plan such as an employer determining eligibility, processing hardship distributions and loans, and determining whether a domestic relations order is a Qualified Domestic Relations Order. That also includes hiring a Third Party Administrator like our firm.

That means, of course, the 403(b) plan could be subject to ERISA’s Title I requirements with all the time and expense to make the DOL’s required corrections – a topic way beyond this blog post.


Here are some points to keep in mind:

First, plan sponsors should seek advice from an experienced ERISA attorney that the 403(b) plan meets the DOL safe harbors – and get it in writing.

Second, plan sponsors should also review the plan annually to make sure that discretion hadn’t become part of the plan. If it has, then go back to the first point.

Finally, a 403(b) plan may be able to escape ERISA, but two other compliance obligations never go away: 1) the Internal Revenue Code, and 2) fiduciary responsibilities under state law – a topic for another time.

#403b #ERISA

Portfolio &
Money Management


Contact Us

4 Landmark Square - Suite 315
Stamford, CT 06901





ADV Part 2 | ADV Part 3 (CRS) Privacy Policy | Cyber Security Policy | Business Continuity Plan Client Secure Upload


Check the background of this firm on FINRA’s BrokerCheck.           


NS Capital LLC is a Registered Investment Adviser. NS Capital and its representatives are in compliance with the current filing requirements imposed upon registered investment advisers by those states in which NS Capital maintains clients. NS Capital may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements. NS Capital’s web site is limited to the dissemination of general information pertaining to its advisory services, and through the NS Blog access to additional investment-related information, publications, and links.  Accordingly,  NS Capital’s web site on the Internet should not be construed by any consumer and/or prospective client as NS Capital’s solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the Internet.  Any subsequent, direct communication by NS Capital with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. For information pertaining to the registration status of NS Capital, please contact the SEC or the state securities regulators for those states in which NS Capital maintains a notice filing.  A copy of NS Capital current written disclosure statement discussing NS Capital’s business operations, services, and fees is available from NS Capital upon written request. NS Capital does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to NS Capital’s web site or incorporated herein, and takes no responsibility such content.  All such information is provided solely for convenience purposes only and all users should be guided accordingly.


Please remember that different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment or investment strategy (including those undertaken or recommended by NS Capital), will be profitable or equal any historical performance level(s).


Certain portions of NS Capital’s web site (i.e. newsletters, articles, commentaries, etc.) may contain a discussion of, and/or provide access to, NS Capital (and those of other investment professionals) positions and/or recommendations as of a specific prior date.  Due to various factors, including changing market conditions, such discussion may no longer be reflective of current position(s) and/or recommendation(s).  Moreover, no client or prospective client should assume that any such discussion serves as the receipt of, or a substitute for, personalized advice from NS Capital, or from any other investment professional. NS Capital is neither an attorney nor an accountant, and no portion of the web site content should be interpreted as legal, accounting or tax advice. 


Rankings and/or recognition by unaffiliated rating services and/or publications should not be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results if NS Capital is engaged, or continues to be engaged, to provide investment advisory services, nor should it be construed as a current or past endorsement of NS Capital by any of its clients.  Rankings published by magazines, and others, generally base their selections exclusively on information prepared and/or submitted by the recognized adviser. Each client and prospective client agrees, as a condition precedent to his/her/its access to NS Capital web site, to release and hold harmless , NS Capital’s officers, directors, owners, employees and agents from any and all adverse consequences resulting from any of his/her/its actions and/or omissions which are independent of his/her/its receipt of personalized individual advice from NS Capital.

© 2020-2025 NS Capital LLC. All Rights Reserved.