ERISA does not cover stock plans

The Employee Retirement Income Security Act requires employers to follow minimum guidelines when they establish pension or health plans for their workers. Employees are not obligated to offer such plans, but a plan that provides retirement funds for its workers is likely protected under ERISA. Tennessee employees may be interested in the recent appeals court ruling that further defined the types of plans that may or may not fall under the protection of the federal law.

The consulting company Booz Allen offered its officers a stock ownership plan that allowed them to purchase common stocks at book value and Class B stocks for a small sum each year. With careful manipulation and timely trading, employees can use their B stocks to gain more common stock, which they can resell to Booz Allen for a handy profit after retirement. When Booz Allen recently sold one of its divisions, some of the officers felt the company had violated their rights under ERISA.

While Booz Allen called this employee benefit a stock plan, the court ruled that it is not the same as a retirement plan because its main purpose is not to offer income for retirement. Therefore, it is not covered by ERISA. While many employees may have used their profits to fund their retirement, the primary goal of the plan was to benefit Booz Allen, not to fund the retirement of its workers.

Understanding the responsibilities of a Tennessee employer in relation to employee retirement plans is essential. This will enable the worker to take immediate action if he or she suspects the fiduciary of the plan is not acting within the scope of ERISA. An attorney can provide guidance and answers to those seeking information as well as strong representation to those whose retirement is compromised because of a mismanaged plan.

Source:, "Stock plans do not substitute for an ERISA plan", Patrick Begos, April 5, 2018

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