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2004-03A
ERISA Sec. 3(1)
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David F. Thompson, Esq.
1051 Valley Road
Lake Forest, IL 60045
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Dear Mr. Thompson:
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This is in response to your request for an advisory
opinion regarding the applicability of Title I of the Employee Retirement
Income Security Act of 1974, as amended (ERISA), to the International
Brotherhood of Electrical Workers Local No. 150 Holiday and Vacation Fund
(Fund). Specifically, you ask for an opinion from the Department of Labor
(Department) that the Fund is not an “employee benefit plan” within
the meaning of section 3(3) of ERISA.
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The correspondence and materials you forwarded contain the following facts
and representations. The Fund has described itself in Form 5500 Annual
Returns/Reports filed with the government as a “multiemployer plan”
within the meaning of section 3(37) of ERISA subject to Title I. The plan
document and the summary plan description furnished to covered participants
state that “the purpose of the Plan is to provide vacation benefits for
eligible Employees.” A bargaining agreement between Local Union No. 150 of
the International Brotherhood of Electrical Workers (Union) and Lake County
Division, Northeastern Illinois Chapter, National Electrical Contractors
Association (Association) provides that the Association’s member employers
will contribute to the “Vacation Trust Fund an amount equal to 5% of the
Journeyman Wireman’s regular straight time hourly wage rate for each hour
worked.” Under the Fund’s governing documents, employer contributions
are paid directly to a separate trust that is intended to be a tax-exempt
trust pursuant to section 501(c)(9) of the Internal Revenue Code and a trust
fund as described in section 302(c) of the Labor Management Relations Act of
1947. The trust document provides that no part of the Fund will revert or be
repaid to the Union, the Association, or a contributing employer.
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On June 30 of each year, the Fund trustees credit
separate accounts kept in the name of each covered employee an amount to
reflect the employee’s share of employer contributions. In addition, a
share of the income earned by the Fund and any appreciation in the value of
Fund assets is credited to each covered employee’s account. The trustees
also charge each account for benefits paid since the preceding accounting
date, and may also charge each account to reflect a share of Fund expenses
and any depreciation in the value of Fund assets. The plan provides that “as
soon as practicable after December 1 of each year, the trustees will pay a
vacation benefit to each participant” equal to the participant’s account
balance as of the preceding June 30. Also, once each calendar year, and as
of the first day of any month except November and December, an employee may
request a withdrawal of his or her account value, subject to a 10%
reduction.
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The term “employee benefit plan” is defined in section 3(3) of Title I
of ERISA to include “an employee welfare benefit plan or an employee
pension benefit plan or a plan which is both an employee welfare benefit
plan and an employee pension benefit plan.” Section 3(1) of ERISA defines
“employee welfare benefit plan” in relevant part as “any plan, fund,
or program . . . established or maintained by an employer or by an employee
organization, or by both, to the extent that such plan, fund, or program was
established or is maintained for the purpose of providing for its
participants or their beneficiaries, through the purchase of insurance or
otherwise . . . vacation benefits . . . [or] any benefit described in
section 302(c) of the Labor Management Relations Act, 1947 (other than
pensions on retirement or death, and insurance to provide such pensions).”
Regulations issued by the Department state that because holiday benefits are
described in section 302(c) of the Labor Management Relations Act, the
definition of employee welfare benefit plan includes plans that provide
holiday benefits. See 29 C.F.R. 2510.3-1(a)(3).
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In your letter you suggest that since Fund payments are
made whether or not the employee actually takes a vacation or holiday, the
Fund is “a system of payroll deductions by an employer for deposit in
savings accounts owned by its employees” that is excluded by Department
regulation 29 C.F.R. § 2510.3-1(a)(2) from those programs that constitute
employee welfare benefit plans within the meaning of ERISA section 3(1).
In our view, the Fund is not a payroll savings plan described in section
2510.3-1(a)(2). The Fund by its terms provides vacation and holiday
benefits. Although the Fund trustees keep a separate account in the name
of each covered employee, the Department has previously concluded that
accounts held in trust are not treated as “owned” by the employees
within the meaning of section 2510.3-1(a)(2). See Advisory Opinion 80-31A
(May 22, 1980). Moreover, the Department has found that vacation pay plans
such as the one you describe are ERISA-covered plans, even though benefits
are generally paid at specified intervals (usually annually or
semi-annually) and benefits are neither contingent upon the occurrence of
a specified event nor restricted to use for a specified purpose when paid
to the participant. See 29 C.F.R. § 2509.78-1, n.1; Advisory Opinion
78-7A (Mar. 13, 1978). Finally, the Department has stated that a vacation
benefit plan’s status as an ERISA-covered plan is not dependent on
whether a participant uses amounts designated as a vacation benefit to
actually take a vacation or paid leave from work. See Advisory Opinion
79-14A (Mar. 2, 1979); Advisory Opinion 79-18A (Mar. 14, 1979).
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The representations and other information you submitted indicate that the
Fund is a trust fund established and jointly maintained by an employee
organization and contributing employers for the purpose of providing covered
participants with vacation and holiday benefits, which are among the
benefits described in section 3(1) of ERISA. Accordingly, in the Department’s
view, the Fund meets the definition of “employee welfare benefit plan”
in section 3(1) of ERISA.(1)
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This letter constitutes an advisory opinion under ERISA
Procedure 76-1 (41 Fed. Reg. 36281, Aug. 27, 1976). Accordingly, this letter
is issued subject to the provisions of the procedure, including section 10
relating to the effect of advisory opinions.
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Sincerely,
John J. Canary
Chief, Division of Coverage, Reporting and Disclosure
Office of Regulations and Interpretations
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Nothing in your submission indicates
the Fund provides retirement income or results in a deferral of income
by employees to termination of covered employment or beyond.
Accordingly, this letter does not need to address whether the
definition of “employee pension benefit plan” in ERISA section
3(2) would include the Fund.
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