Plan Without Employees Not Governed by ERISA

November 7, 2005 ( - The US District Court for the Northern District of Illinois has ruled that a pension plan that covered only the owner of the firm that sponsored it is not governed by the Employee Retirement Income Security Act (ERISA).

BNA reports that Dr. John Meiszner, as owner of Southwest Psychiatric Associates Ltd., established a retirement plan in 1980 that covered him and his employee.   Meiszner served as the plan’s trustee, and Suburban Bank & Trust Co. became the plan’s investment manager in 2000.   Meiszner’s employee retired in 1994 and received her benefits, according to the court.

Claiming it had breached its ERISA fiduciary duties between February 2000 and February 2003 by failing to diversify the plan, Meiszner sued Suburban, according to BNA.   Suburban filed a motion for summary judgment, saying the plan was not subject to ERISA because its only participant during the relevant time period was Meiszner.  

The court granted Suburban’s motion, ruling that, under ERISA and its regulations, “plans without employees” are not “employee benefit plans” and will not be covered by ERISA.   The court rejected Meiszner’s argument that, because the plan at one time covered both him and his employee, it was governed by ERISA even though he was now the only participant.   The court said the regulation that discusses the term “employee benefit plan” is written in the present tense and makes no mention of past employee participation in terms of deciding whether a plan is governed by ERISA.

The case is Meiszner v. Suburban Bank & Trust Co., N.D. Ill., No. 04 C 8017, 10/31/05.