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Mr. Richard Tanner
Executive Director
Kentucky Magistrates and Commissioners Association
400 King’s Daughters Drive
Frankfurt, Kentucky 40601-4106
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1999-06A
ERISA Sec. 3(32)
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Dear Mr. Tanner:
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This is in response to your correspondence concerning the application of
Title I of the Employee Retirement Income Security Act of 1974 (ERISA) to
the proposed participation of the employees of the Kentucky Magistrates and
Commissioners Association, Inc. (KMCA) in the County Employees' Retirement
System (CERS), which is administered by the Kentucky Retirement Systems (KRS).
Specifically, you request an advisory opinion that the status of CERS as a
"governmental plan" within the meaning of section 3(32) and
section 4(b)(1) of Title I of ERISA would not be adversely affected if
employees of KMCA were permitted to participate in CERS. Pursuant to your
request, we are assuming without ruling on this issue that CERS, as
currently operated, is a governmental plan under ERISA.
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KMCA is a nonprofit, nonstock, organization (formed in 1959 pursuant to Ky.
Rev. Stat. Ann. § 273.160 to 273.290)(1)
whose purpose is to promote the exchange of information among magistrates
and commissioners about issues affecting county government and possible
solutions and to promote legislation which would allow magistrates and
commissioners to operate their local county governments more effectively.
(Article II of Articles of Incorporation).(2)
Specifically, it provides information and training for members on a wide
variety of issues related to county government. Such topics include planning
and zoning, operation of the county jail, solid waste mandates, local
taxation, economic development policies, cable television franchises,
cellular telephone towers, disaster and emergency services, national flood
insurance program, rural water development, and transportation. KMCA also
provides information on the effect of changes of law on county government
operations and assists government officials in developing local ordinances
by providing research and sample ordinances. It acts as liaison to other
local, regional and state agencies and serves as the representative for
magistrates and county commissioners on state commissions and authorities.
In addition, the president and executive director testify before committees
of the Kentucky General Assembly on the effect of legislation on county
government.
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KMCA is administered by a board of directors, consisting of elected county
officials who are magistrates or commissioners, which meets at least
quarterly and which determines the management policy of KMCA. If there is a
vacancy on the board, the remaining directors appoint a member. The board of
directors is comprised of KMCA’s officers (President, two Vice Presidents,
Secretary, Treasurer, and a Sergeant at Arms, all of whom are elected for
one-year terms)(3), the immediate past
president and four directors. The president exercises general supervision
over the affairs of KMCA and appoints five standing committees whose members
are all magistrates or commissioners. The staff consists of two employees: a
director and an administrative assistant, who serve at the direction of the
board of directors. Only employees of KMCA are proposed to participate in
CERS.(4) These employees are subject to
income tax withholding for FICA but not for FUTA. Aside from KMCA’s
proposed participation as an employer in CERS, KMCA sponsors no other
retirement plan. KMCA is subject to the state open meetings and open records
laws.
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The voting members of KMCA are magistrates and
commissioners, who meet at least three times annually. The payment of
their dues out of the county’s annual budget is approved by each county
fiscal court, and the amount of dues paid by each county varies in
accordance with the county’s population. The membership may amend the
bylaws by 2/3 vote of those present.(5)
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KMCA was not created by special statute, but opinions
of the state attorney general, as well as certain statutes and
resolutions, recognize its role as the representative of magistrates and
commissioners in the state. Furthermore, KMCA falls within a general
category of entities that state law has defined as “counties” for
purposes of eligibility for the retirement system. Specifically, Ky. Rev.
Stat. Ann. § 78.510(3) defines a county to include a nonprofit
organization created and governed by a county, counties, or elected county
officers.(6)
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Fifty one percent of KMCA’s revenue is derived from dues paid by county
governments; 8% from convention earnings; 17% from marketing the insurance
program of the Kentucky Association of Counties Advance Revenue Program; and
23% from endorsing a health plan available only for employees of counties
and related entities.(7) KMCA is exempt
from federal and state income tax but pays property, ad valorem and sales
taxes.
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Section 4(b)(1) excludes from coverage under Title I of ERISA any plan that
is a "governmental plan," and section 3(32) 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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In view of the foregoing representations, it is the view of the Department
of Labor that KMCA is a governmental agency or instrumentality within the
meaning of section 3(32) of ERISA and that inclusion of KMCA’s employees
in CERS would not of itself adversely affect the status of CERS as a
"governmental plan" under Title I of ERISA. 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.
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This letter constitutes an advisory opinion under ERISA Procedure 76-1 and,
accordingly, it is issued subject to the provisions of that procedure,
including section 10 thereof 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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The corporation was successor to an
unincorporated organization that began in 1952.
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Magistrates and commissioners are
elected officers who serve 4-year terms. Magistrates or county
commissioners together with the county judge/executive form the fiscal
court, which is the governing body of counties in the Commonwealth of
Kentucky. The primary responsibilities of a magistrate or commissioner
are appropriation of county revenues and carrying out governmental
functions necessary for the operation of the county, including buying
and selling property, supervising county affairs and county officers,
constructing and maintaining all county buildings, roads and property,
including the county jail system, establishing all appointive offices,
and adopting an administrative code for the county. Each county is
divided into three to eight districts, and under a magistrate form of
government, each district elects a magistrate. Under a commissioner
form of government, the county at large elects three commissioners.
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Officers may serve no more than two
successive terms. In the event an officer leaves his position, the
board of directors appoints a member to complete the term.
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You advise that employees contribute
5% of their salary to CERS, Ky. Rev. Stat. Ann. § 78.610, and that
each employer contributes a percentage of an employee's salary that is
determined by CERS. Ky. Rev. Stat. Ann. § 61.565. KMCA employs two
employees who would participate in CERS if KMCA joined CERS.
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Upon approval of the membership
committee, retired or former magistrates or county commissioners may
become non-voting, associate members and private individuals or
businesses may become associate or supporting members by paying
specified dues set by the board of directors. This letter does not
address any benefit arrangements that may cover non-voting members.
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Ky. Rev. Stat. Ann. § 78.510(3)
defines county as follows: “?County’ means any county, or
nonprofit organization created and governed by a county, counties, or
elected county officers, sheriff and his employees, county clerk and
his employees . . . or political subdivision or instrumentality,
including school boards, charter county government, or urban- county
government participating in the system by order appropriate to its
governmental structure, as provided in KRS 78.530, and if the board is
willing to accept the agency, organization, or corporation, the board
being hereby granted the authority to determine eligibility of the
agency to participate.” The “system” refers to CERS and the
“board” means the CERS board of trustees.
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KMCA earns endorsements and
commissions by helping to administer some of the Kentucky Association
of Counties’ programs which are open only to county governments, as
well as to special districts, such as water districts or library
districts, by providing marketing and information to KMCA members
about the specifics of the programs.
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