Skip to content

Department of Labor (DOL)’s safe harbor exemption from ERISA

The Baldwin Group
Updated: April 24, 2024
1 minute read

Question: What requirements must be met for a payroll practice to fall under the Department of Labor (DOL)’s safe harbor exemption from ERISA?

Answer:  Certain welfare benefit plans that would otherwise fall under ERISA and are characterized as “payroll practices” are exempted by DOL regulations. To fall under the DOL’s safe harbor exemption, a payroll practice must: (1) be unfunded; (2) not pay more than an employee’s normal compensation; and (3) cover current employees only (e.g., cannot cover former employees, retirees, or other nonemployees). If the payroll practice meets these requirements, it will not be considered an ERISA plan.

Examples of practices that may fall under this exemption include the following:

  • The payment of wages for work performed by an employee, including overtime pay, shift premiums, and holiday or weekend premiums.
  • Income replacement, short-term disability, salary continuation, or paid medical leave programs (including sick pay), paid out of an employer’s general assets. These are self-insured programs and generally all are self-administered.
  • Vacation or holiday pay.
  • Pay during active military duty, jury duty, or testifying in official proceedings.
  • Pay received during periods engaged in training in which the employee is performing little or no productive work (even if paid through government subsidies).

Pay received during sabbatical leaves or time off while pursuing further education.

Related Insights

Stay in the know

Our experts monitor your industry and global events to provide meaningful insights and help break down what you need to know, potential impacts, and how you should respond.

Baldwin Bulletin
Question of the Month.
Question: Please confirm whether an employee’s spousal relocation of personal residence to the United States following a period of several...
Baldwin Bulletin
U.S. Supreme Court Hears Arguments Related to Legality of Medication Abortion.
On March 26, 2024, the Supreme Court heard the case of Alliance for Hippocratic Medicine, et al v FDA (5th...
Medicare Part D
Important Update on New Medicare Part D Creditable Coverage Determination.
It was previously reported that the Inflation Reduction Act of 2022 (“IRA”) included certain cost-reduction provisions that may affect Medicare...
PCORI 2024 Fee Payment Amount Adjusted and Payment Reminder.
The annual fee to fund the Patient-Centered Outcomes Research Institute (PCORI) Trust Fund Fee ​is due on July 31, 2024,...
Baldwin Bulletin
Impact of the Religious Freedom Restoration Act (RFRA) on the ACA Sec. 1557 & Title VII of the Civil Rights Act (CRA)
US District Court ruling in Christian Employers Alliance v. EEOC, et al. limits federal government enforcement of ACA Sec. 1557...
Let's make it possible

Partner with us to build solutions that align with your business, individual, or employee needs and open new possibilities for your future.

Connect with us