As of now courts use a 3-part test to determine whether an employer sponsors a plan. The court considers several factors including: (1) whether a plan exists; (2) whether the plan falls within the Department of Labor’s (DOL) safe- harbor provision as defined below: and (3) whether the plan was established or maintained by the employer with the intent to benefit employees.
ERISA includes the safe harbor exemption, which requires that 1) there must be no employer (i.e. pre-tax) contributions; 2) involvement by employees is voluntary; and 3) the employer’s role in the plan is limited to collecting premium through payroll deductions and remitting them to an insurer, and that the employer does not obtain any compensation for its services other than sensible compensation for administrative services.
In order to avoid accidently creating a new ERISA plan when attempting to provide a new benefit to employees or changing an existing program, it is advised that employers consult with their benefits lawyer.
It is important to note, most employers do not wish to sponsor these types of plans since it creates liability in administering them. No plan document or SPD would be required if the plan is treated as a voluntary benefit plan.