The decision problem is not whether an account says “IRA.” It is whether the employer has established a Title I pension plan, whether Part 4 applies, what property exists, and whether any natural person outside an exempt institution handles it. IRA custody and a tax label do not decide Title I coverage or handling. 29 U.S.C. §1002 29 U.S.C. §1003 29 U.S.C. §1101 29 U.S.C. §1112
Separate employer plans from employee-only payroll IRAs
- 1Confirm that an employee pension benefit plan exists.
- 2Determine whether Title I covers it and whether Part 4 applies.
- 3Identify the plan’s funds or other property.
- 4List every natural person whose actual functions amount to handling.
- 5Test exemptions person by person; an exempt institution does not exempt other handlers.
- 6Calculate each handler’s amount and verify form, surety, and current reporting materials.
SEP and SARSEP: the institution is not the whole analysis
SEP and grandfathered salary-reduction SEP (SARSEP) are tax categories described by the IRS. DOL explains that SEP arrangements generally place actual handling of IRA assets with financial institutions whose employees are exempt, so an additional bond often is not necessary in the usual structure. That observation is not a plan-wide IRA exemption: identify any employer employee, administrator, or other person who can actually move or control property and test that person separately. IRS Publication 560 FAB 2008-04, Q16
SIMPLE IRA: trace contributions and authority
A SIMPLE IRA is an employer retirement arrangement for tax purposes; that label neither supplies nor removes a §412 obligation. DOL’s Q16 practical observation about customary exempt-institution handling also addresses SIMPLE IRA arrangements, but a noninstitutional person with transfer, disbursement, or final authority still requires the ordinary handling and exemption analysis. Internal Revenue Service FAB 2008-04, Q16
Handling is functional, not title-based. Custody, power to transfer or disburse, authority to sign, final authority over investments, and supervision that creates a risk of loss can qualify. Controls may show that a person lacks the required risk of loss, but controls are not an independent exemption. 29 C.F.R. §2580.412-6 FAB 2008-04, Q5–Q8 and Q18–Q21
Payroll-deduction IRA safe harbor is narrow and conditional
An IRA payroll-deduction program is not an employee pension benefit plan under 29 C.F.R. §2510.3-2(d) only when the employer makes no contribution, employee participation is completely voluntary, the employer’s role is limited to permitting publicity and collecting and remitting payroll deductions without endorsing the program, and the employer receives no consideration other than reasonable reimbursement of actual expenses. Actual operation must satisfy every condition. 29 C.F.R. §2510.3-2(d)
If every condition is met, §412 does not apply because there is no Title I pension plan on those facts. Failure of a condition only removes this safe-harbor route; it does not by itself prove that §412 applies. Continue through plan status, Title I, Part 4, property, handling, and exemptions. 29 C.F.R. §2510.3-2 29 U.S.C. §1112
Facts that change the answer
- Whether common-law employees participate or the arrangement is owner-only. 29 C.F.R. §2510.3-3(b)–(c)
- Whether the employer contributes, endorses the program, or exceeds the payroll safe harbor’s limited role. 29 C.F.R. §2510.3-2
- Whether deductions go directly to the institution or another person controls them. 29 C.F.R. §2580.412-6
- Whether the custodian and each relevant person meet a specific exemption. 29 C.F.R. Part 2580, Subpart F
- Who can authorize transfers, distributions, corrections, or investment movement. 29 C.F.R. §2580.412-6
Practical example: custody alone does not finish the review
Assume a private employer maintains a SIMPLE IRA for employees. Payroll sends deductions directly to a bank, and only identified bank employees can access the IRA assets. DOL’s customary-structure observation may support an exempt-institution result for those handlers. If the employer’s benefits manager can independently redirect remittances or authorize withdrawals, however, that natural person must be tested separately. The SIMPLE label and bank custody do not answer that separate handling question. FAB 2008-04, Q5–Q8 and Q16
Practical example: bounded payroll safe harbor
Assume an employer contributes nothing, participation is voluntary, payroll merely forwards each employee’s selected deduction without endorsing the program, and the employer receives only reasonable reimbursement of actual expenses. If actual operation meets every regulatory condition, the program is not an ERISA pension plan under that safe harbor. Employer selection of investments or compensation from the IRA provider would change the facts and require a renewed plan-status analysis. 29 C.F.R. §2510.3-2(d)
Methodology, source review, and next step
This is an educational federal §412 screen, not a determination of tax qualification, fiduciary prudence, state-law duties, or actual bond or insurance-contract coverage. The official sources are reviewed as of the date shown above. After identifying a nonexempt handler, use the ERISA bond requirements guide for form, surety, and current reporting review and the amount guide for the handler-by-handler calculation. 29 U.S.C. §1112 29 C.F.R. §2580.412-11