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Alan B. Cabral, Esq.
Seyfarth, Shaw, Fairweather & Geraldson
One Century Plaza, Suite 3300
2029 Century Park East
Los Angeles, California 90067-3063
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2001-07A
ERISA Sec. 3(32)
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Dear Mr. Cabral:
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This responds to your request for an advisory opinion concerning the
applicability of Title I of the Employee Retirement Income Security Act of
1974, as amended (ERISA), to the Santa Clara County (county) Transit
District Amalgamated Transit Union Pension Plan (plan). Specifically, you
propose that the plan, which now covers approximately 1,620 employees of
Santa Clara Valley Transportation Authority (VTA), will be modified to also
cover three employees of the Amalgamated Transit Union Local 265 (LU 265),
which is the labor union representing VTA employees who participate in the plan.
Based on your representations and documents submitted, you request an
opinion concluding that the plan, as so modified, would meet the definition
of a governmental plan" in ERISA § 3(32) and, thus, be excluded from
Title I coverage by ERISA § 4(b)(1).
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VTA, an independent transit district, was established in 1972 through a county-wide
election as provided for by California statute. See Cal. Pub. Util. Code
§§ 100040-100050. On behalf of the county and cities within the county,
VTA operates virtually all county transit services, which include bus and
light rail systems, transit planning, and highway projects. It exercises the
power of eminent domain and, as authorized by county election, may issue
bonds. Cal. Pub. Util. Code §§ 100130, 100400-100413. A twelve-member
board of directors, which is designated by statute a legislative body for
VTA and may enact ordinances, supervises VTA transit operations. Cal. Pub.
Util. Code §§ 100060-100070. VTA's board of directors must include two
members of the county board of supervisors; five members of San Jose's city
council; and five city council members from other cities within the county.
Id. at § 100060. There appear to be no private interests involved in VTA
operations.
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County sales and use taxes provide more than 55 percent of VTA's operating
revenues, and state sales taxes provide an additional 27 percent of
revenues. VTA's remaining financial support is from passenger fares and from
a grant agreement with the U.S. Department of Transportation.
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To operate the VTA transit system, VTA employs approximately 2,100
individuals, all of whom you represent to be government employees.(1)
See Cal. Pub. Util. Code § 100120. VTA has a collective bargaining
agreement with LU 265 that covers most VTA employees, excepting only about
480. Further, LU 265 represents in collective bargaining all VTA employees
for whom the plan provides pension benefits.
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The plan was established pursuant to an authorization in Cal. Pub Util. Code
§ 100370 and became effective January 1, 1973.(2) It is a
defined benefit pension plan to which only VTA contributes. The plan is
administered by a five-member joint pension board. VTA appoints three
members to the pension board; they are its chief financial officer, its
deputy director of fiscal resources, and its personnel manager. LU 265
appoints the other two members to the pension board.
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LU 265, according to its constitution and bylaws, is organized so that local
union members elect its officers. Among its elected officers is a president
and business agent who generally supervises LU 265's business affairs,
including exercising hiring and firing authority over LU 265's three
employees. You propose that all three individuals employed by LU 265 will
join the plan as participants. Further, you propose that the plan will begin
accepting LU 265's contributions on behalf of its three employees, including
contributions for past service credit.
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ERISA § 4(b)(1) provides that Title I of ERISA does not
apply to a governmental plan as defined in ERISA § 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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Based on the facts provided in your submission, we conclude that VTA is an
agency or instrumentality of government within the meaning of ERISA §
3(32). VTA was organized, as provided by California statute, pursuant to a county-wide
election. It operates under control of the county and of multiple cities
within the county;(3) performs a public function; exercises,
among other governmental powers, the power of eminent domain; and has no
private interests involved in its operations. Further, state and local sales
and use taxes provide most financial support for VTA, with the remainder
coming from VTA’s collection of transit fares and from federal government
grants.
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The Department of Labor (department) has previously addressed whether §
3(32) of ERISA includes in the governmental plan definition not only plans
established by the unilateral action of employers which are governmental
entities, but also plans collectively bargained by governmental entities and
plans jointly administered by trustees appointed by governmental entities
and by labor unions where such plans were funded by, and covered only
employees of, such governmental entities. It is also the department's view
that 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. However, if a benefit arrangement were to cover more than
a de minimis number of private sector employees, the department may not
consider it a governmental plan under Title I of ERISA.
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Your submission indicates that the plan is maintained pursuant to collective
bargaining agreement between LU 265 and VTA; the plan is funded exclusively
by contributions from VTA, except that, as discussed above, LU 265 will
begin contributing on behalf of its three employees; VTA appoints three of
five directors on the plan's joint pension board; and, except for three
employees of LU 265 discussed above, the plan covers only employees and
retired employees of VTA (and their dependents). Based on this information,
it is the view of the department that the plan is a governmental plan within
the meaning of § 3(32) of ERISA, despite its inclusion of three
non-governmental employees, particularly inasmuch as the activities of the
non- governmental employees relate exclusively to representing the
governmental employees in regard to aspects of their employment with their
governmental employer. Accordingly, the plan, as a governmental plan within
the meaning of ERISA § 3(32), is excluded from ERISA Title I coverage by
ERISA § 4(b)(1).
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This letter constitutes an advisory opinion under ERISA Procedure 76-1, and
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 provisions of Title I of ERISA and is not
determinative of any particular tax treatment under the Internal Revenue
Code.
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Sincerely,
John J. Canary
Chief, Division of Coverage, Reporting and Disclosure
Office of Regulations and Interpretations
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The transit district's public
employer status was noted by the United States Supreme Court in a
decision concerning Title VII of the Civil Rights Act of 1964. See
Johnson v. Transportation Agency, 480 U.S. 616, 627 n. 6 (1987).The
Although the name Santa Clara County Transportation Agency was used in
the cited decision, the transit district is now legally known as the
Santa Clara Valley Transportation Authority. Cal. Pub. Util. Code §
100002.
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This letter is not intended to
express any view concerning whether adding three employees of LU 265
as plan participants meets any applicable requirements of California
law.
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For the purposes of this opinion, we
assume that the county is a political subdivision of California and
that each city within the county is a political subdivision of
California. We assume without discussion, for purposes of the views
expressed in this letter, that the county and cities within the county
are political subdivisions of California.
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