Is A Self-Funded STD Plan An ERISA Plan Or An Exempt Payroll Practice?

ERISA generally governs all pension and welfare benefit plans. In regulations, the Department of Labor ("DOL") has exempted certain types of plans or practices from the definition of a welfare benefit plan under Title I of ERISA. One commonly used exemption is the "payroll practice" exemption. Exempt payroll practices include "payment of an employee's normal compensation, out of the employer's general assets, on account of periods of time during which the employee is physically or mentally unable to perform his or her duties, or is otherwise absent for medical reasons (such as pregnancy, a physical examination or psychiatric treatment)." 29 CFR § 2510.3-1(b)(2).

This regulation is used to exempt self-funded short-term disability (STD) plans and salary continuation plan from ERISA coverage. An exempt plan is not required to: