Earlier this week, Starbucks announced that it is expanding its tuition reimbursement program to include more employees. One article I read actually referred to as it as a “tuition plan.” I don’t pretend to understand the details of their arrangement, but in discussing the concept with another attorney, it reminded me that there can sometimes be considerable confusion over what constitutes a benefit plan as opposed to just a general “benefit” to employees. I refer to this as the “Big B, little b” conundrum. Big B benefit plans are usually subject to ERISA and require specific administration. Little B “benefits” are those perk and extras we offer to employees to be competitive in the market or to improve employee morale.
One of the most commonly debated (and litigated) benefits is severance pay. Numerous cases have been brought over whether employer severance is a “plan” or merely a “policy.” ERISA provides for the existence of “scholarship plans” as an employee welfare benefit plan, but tuition reimbursement programs are not typically considered to be “plans” subject to ERISA. Things like adoption assistance and transit reimbursement are commonly referred to as “plans” but they are generally not the types of “plans” envisioned by ERISA.
ERISA Section 3(1) defines a welfare plan as possibly being for medical, surgical or hospital case, sickness, accident, disability or death benefits, unemployment vacation, training, day care or even legal services. ERISA Section 3 includes a number of definitions of retirement plans that provide future benefits to employees. There are also a number of what might be called “non-qualified” plans like deferred compensation plans or stock plans. But remember that just because an arrangement provides something akin to what a benefit plan would provide, the arrangement does not automatically become an ERISA plan.
The point is that referring to something a “plan” does not automatically make it an ERISA plan. And calling something a “policy or program” does not automatically mean it is not a benefit plan subject to ERISA. What you are providing and how you are providing it generally dictates whether you have an ERISA plan not what you call it. If you want it to be a benefit plan, follow the rules and make it one. If you want it to be something else, like maybe a perk, make sure you implement it in a fashion that does not by default create a benefit plan. And if you need help with the distinction, make sure to consult with your attorneys at Fox Rothschild.