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Ms. Joan Ebert Rothermel
Klein, Zelman, Rothermel & Dichter, L.L.P.
485 Madison Avenue
New York, New York 10022-5803
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2000-06A
ERISA Sec. 3(32)
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Dear Ms. Rothermel:
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This responds to your request for an advisory opinion concerning whether
certain employee benefit plans are “governmental plans” within the
meaning of section 3(32) of Title I of the Employee Retirement Income
Security Act of 1974, as amended (ERISA). Specifically, the plans covered by
your request are: the Annuity Plan of the Patrolmen’s Benevolent
Association of the City of New York (Annuity Plan); the Health and Welfare
Fund of the Patrolmen’s Benevolent Association of the City of New York
(Health Fund); and the Retiree Health and Welfare Fund of the Patrolmen’s
Benevolent Association of the City of New York (Retiree Health Fund)
(collectively, Plans).
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Your submission includes the following facts and representations. The
Patrolmen’s Benevolent Association of the City of New York (PBA) is the
exclusive collective bargaining representative for police officers(1)
of the City of New York (City). The Annuity Plan, Health Fund, and Retiree
Health Fund were created in 1968, 1964, and 1977, respectively, pursuant to
collective bargaining agreements between the PBA and the City. The Plans
have been continued under successive collective bargaining agreements
between the PBA and the City, including supplemental agreements related to
each particular plan. The Plans cover City police officers regardless of
whether they are members of the PBA.
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The Annuity Plan is a defined contribution pension plan that limits
participation to individuals who are employed by the Police Department of
the City as police officers, or were so employed and have not received a
full distribution of their benefits under the Annuity Plan. Under the
current collective bargaining agreement between the PBA and the City (CBA)
and the latest supplemental agreement related to the Annuity Plan, the City
contributes up to $522 per year for each actively employed police officer.
The Annuity Plan does not permit contributions by employees.
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The Health Fund provides welfare benefits that include dental and optical
benefits, a prescription drug program, and catastrophic medical benefits.(2)
Participation by governmental employees is limited to actively employed
police officers (including those on suspension), their dependents, and
dependents of police officers killed in the line of duty. The Health Fund
also covers employees of the PBA and of the Health Fund, and their
dependents, who are eligible for dental, prescription drug, and optical
benefits.(3) The Health Fund
covered a total of 26,200 participants at the time of your request, with
26,050 of them being police officers and 150(4)
being employees of the PBA or the Health Fund. Under the CBA and the latest
supplemental agreement related to the Health Fund, the City contributes $925(5)
per year to the Health Fund for each actively employed police officer. The
PBA and the Health Fund contribute $55.97 per month for each of their
employees participating in the Health Fund for dental, prescription drug,
and optical benefits. There are no employee contributions to the Health
Fund.
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The Retiree Health Fund provides supplemental welfare benefits, including
dental, optical, and hearing aide benefits, and a prescription drug program,
for certain retired police officers and their dependents. Specifically,
participation in the Retiree Health Fund is limited to police officers who
retired from the City Police Department with the rank of patrolman on or
after January 1, 1971, and who meet certain other criteria. Under the CBA
and the latest supplemental agreement related to the Retiree Health Fund,
the City contributes $925(6) per year to
the Retiree Health Fund for each covered retiree. There are no retiree
contributions.
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Each Plan is administered under a trust agreement by a board of trustees
comprised of the President, First Vice-President, Second Vice-President,
Treasurer, and Recording Secretary of the PBA. There are no trustees
appointed by the City. The trust agreement for each Plan states that its
purpose is to establish a fund to receive moneys from the City and to
provide benefits for patrolmen of the Police Department of the City, all in
accordance with the terms of the trust agreement and such agreements between
the PBA and the City as may from time to time govern the use of moneys
provided by the City for the fund. The supplemental agreement relating to
each Plan provides that nothing in the trust agreement shall be inconsistent
with or contradict any of the terms and provisions of the supplemental
agreement. Each supplemental agreement requires that the trustees provide
the City with copies of certain documents, including an annual certified
public accountant’s report and an annual report showing the condition and
affairs of the trust fund during the year, and specifies that the trust fund
is subject to audit by the Comptroller of the City. In addition, the
supplemental agreements for the Health Fund and the Retiree Health Fund
require that procedures involving benefit administration, including coverage
criteria, enrollment method, appeals process and benefits offered, be
approved by the City’s Office of Labor Relations.
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ERISA section 4(b)(1) provides that Title I of ERISA does not apply to any
employee benefit plan that is a "governmental plan" as defined in
ERISA section 3(32). Section 3(32) of ERISA defines the term
"governmental plan," in pertinent part, as "a plan
established or maintained for its employees by the Government of the United
States, by the government of any State or political subdivision thereof, or
by any agency or instrumentality of any of the foregoing."
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It is the view of the Department of Labor (Department) that the term
"governmental plan" as defined in ERISA section 3(32) is not
limited to plans established by the unilateral action of employers which are
governmental agencies. In this regard, the Department has interpreted the
term "governmental plan" to include plans established or
maintained pursuant to a collective bargaining agreement between a
governmental entity and a labor union where such plans are funded by, and
cover only employees of, governmental entities. It is also the
Department’s view that the participation by a de minimis number of private
sector employees in an otherwise governmental plan will not adversely affect
the plan’s status as a governmental plan.
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Your submission indicates that the Plans were created pursuant to collective
bargaining between the PBA and the City, which is a political subdivision of
a state, and continue to be subject to agreements between those entities;
the Plans provide benefits exclusively for current or former employees of
the City and/or their dependents, except for a de minimis number of private
sector participants in the Health Fund; and the City provides all of the
contributions to the Plans except for the contributions covering the Health
Fund’s private sector participants. Additionally, plan operations are
subject to oversight by the City through audit and reporting requirements
and, in the case of the Health Fund and the Retiree Health Fund, certain
basic procedures of plan administration must be approved by the City. Based
on this information, it is the opinion of the Department that each of the
Plans is a “governmental plan" within the meaning of section 3(32) of
ERISA, despite the inclusion of the relatively small number of non-
governmental employees in the Health Fund, particularly inasmuch as the
activities of those employees relate exclusively to representing the
governmental employees in regard to aspects of their employment with their
governmental employer or providing them with employee benefits. Accordingly,
the Plans are excluded from ERISA Title I coverage by virtue of ERISA
section 4(b)(1).
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This letter constitutes an advisory opinion under ERISA Procedure 76-1 and,
accordingly, is issued subject to the provisions of that procedure,
including section 10 thereof concerning the effect of advisory opinions.
This letter relates solely to the application of the provisions of Title I
of ERISA and is not determinative of any particular tax treatment under the
Internal Revenue Code. Nor is this letter determinative of the status of the
Annuity Plan under Title IV of ERISA, which is under the jurisdiction of the
Pension Benefit Guaranty Corporation.
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Finally, we note that the benefit booklets included in your submission as
Exhibits G and J state that ERISA gives certain rights to participants of
the Plans and imposes duties on fiduciaries of the Plans. We believe it is
important that participants and beneficiaries of the Plans have accurate
information concerning the law that governs their plan and the conduct of
plan fiduciaries. You have advised that the Plans will promptly notify their
participants and beneficiaries that Title I of ERISA does not apply to the
Plans, and that appropriate actions will be taken to remove all erroneous
references to rights and status under Title I of ERISA from plan documents
and literature, including plan-related web sites.
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Sincerely,
John J. Canary
Chief, Division of Coverage, Reporting & Disclosure
Office of Regulations and Interpretations
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The term “police officer” is
used in your submission to refer to the classification of City police
force employees that is comprised of patrolmen. It excludes police
force employees in other classifications, such as detectives,
sergeants, and lieutenants.
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The Health Fund’s benefits
supplement comprehensive medical coverage that is provided separately
for employees of the City. You explain in this regard that the City,
in conjunction with the PBA and other municipal unions, negotiates
such comprehensive medical coverage with a variety of health carriers.
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You advised by telephone that the
Health Fund acts as the nominal employer, for administrative purposes,
of employees whose services are shared by the three Plans at issue
here and the Legal Services Fund of the Patrolmen’s Benevolent
Association of the City of New York, which plan is not included in
your opinion request. The compensation of these employees and the
employer contributions for their participation in the Health Fund are
allocated among the four plans according to the time the employees
spend on each plan. This letter should not be read as expressing a
view on the characterization of the Health Fund as the employer of
these employees for administrative purposes because that issue is, in
our view, immaterial to the governmental plan issue presented by your
opinion request.
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As of June 1999, this number had
decreased to 103 employees, with 20 being employed by the PBA and 83
by the Health Fund.
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Out of the $925 per employee annual
City contribution, the trustees of the Health Fund allocate $145 to
the Legal Services Fund of the Patrolmen’s Benevolent Association of
the City of New York. The $925 annual contribution increases to $1,053
after May 1, 1999, and to $1,200 after March 31, 2000.
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This annual amount increases the
same as in fn.5.
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