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Melvin H. Pizer, Esq.
Blitman & King
The 500 Building, Suite 1100
500 South Salina Street
Syracuse, New York 13202
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1999-15A
ERISA Sec. 3(32)
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Dear Mr. Pizer:
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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 (ERISA) to the East Islip Teachers' Association, Local 2618, AFT
Welfare Trust Fund (hereinafter, the Fund). The Fund provides welfare
benefits to active employees of the East Islip Union Free School District
No. 3 (hereinafter, the School District), to individuals retired from
employment with the School District,(1)
and to one individual employed by the Fund itself. Based on these and other
representations and on documents that you submitted, you request an opinion
concluding that the Fund is a "governmental plan," as defined in
ERISA § 3(32) and, thus, that it is excluded from ERISA Title I coverage by
§ 4(b)(1).
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You advise that the School District has signed an agreement with the East
Islip Teachers' Association, Local 2618, American Federation of Teachers,
AFL-CIO (hereinafter, the Local Union), to contribute to the Fund on behalf
of eligible, active School District employees. You further state that the
Local Union operates pursuant to a constitution and bylaws that provide for
active members to elect Local Union officers, including the officers who
serve on the Local Union's executive board,(2)
and that the Local Union represents both teachers and certain other School
District employees in collective bargaining. Moreover, the School District
has recognized the Local Union as the exclusive bargaining agent for its
employees who are teachers, nurses, clerical workers, and paraprofessionals,
including aides for monitoring, instructional, clerical, and health duties.
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According to the collective bargaining agreement between the School District
and the Local Union, the Fund was established in 1975 to provide health and
other welfare benefits to supplement the benefits that are unilaterally
provided by the School District to its employees. The Fund operates under a
Trust Agreement administered by four trustees appointed by the executive
board of the Local Union. The Agreement also provides that neither the terms
of the Trust nor any amendment to the Trust may be inconsistent with
collective bargaining agreements in effect between the Local Union and the
School District.(3) The Fund is
currently required by collective bargaining agreement to furnish its current
annual audit to the School District's superintendent of schools. In
addition, at the School District's request through the New York Public
Employment Relations Board, a certified public accountant recently audited
the Fund and provided the School District with the results.
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The Fund currently has a total of 677 participants: 520
active School District employees who are represented by the Local Union in
collective bargaining; 150 retired School District employees; six clerical
employees of the School District who, because they are “confidential”
staff of the School District's superintendent, are ineligible for Local
Union membership; and one employee of the Fund. The Fund provides
different benefits for actively employed School District employees in
different job classifications; among the benefits provided are life
insurance; accidental death and dismemberment insurance; excess major
medical benefits; excess dental benefits; legal services benefits; vision
benefits; co-pay and deductible reimbursement; and funeral benefits.(4)
Retired School District employees may elect to receive only legal
services benefits, major medical benefits, and life insurance.(5)
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The School District contributes an average of
approximately $1,200 on behalf of each participating teacher and secretary
and an average of approximately $1,000 on behalf of each paraprofessional,
for a total of $748,000 in contributions during the 1997-98 fiscal year (a
year in which the Fund's revenues from all contributions totaled
$762,680).(6) Retirees'
contributions for the 1997-98 fiscal year averaged about $94 each. The
single Fund employee participant pays $555 for the 1997-98 fiscal year in
order to participate in the Fund.(7)
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You represent that, until recently, the Fund had taken the position
generally that it was covered by Title I of ERISA and has submitted annual
reports pursuant to ERISA Title I filing requirements, but the Fund now
asserts that it is not covered by Title I because it constitutes a
governmental plan within the meaning of ERISA § 3(32).
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Section 3(32) of ERISA defines a "government
plan" as "a plan established and 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." The term "governmental plan" also includes a
plan administered by an "employee organization," within the
meaning of ERISA § 3(4), that provides benefits exclusively to employees of
a political subdivision, agency, or instrumentality of local government who
are also the only members of the employee organization, provided that the
plan is funded exclusively by the government and by the government's
employees who are members of the sponsoring employee organization.(8)
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We note that the Fund covers, in addition to the
employee-members of the Local Union, one non-governmental employee (i.e.,
the one employee of the Fund who also participates in Fund benefits). It
is our view that inclusion of this one individual is not sufficient to
alter the nature of the plan as a governmental plan. It would not be
consonant with the intended scope and purpose of the “governmental
plan” exception to treat the Fund as failing to fall within the
exception in ERISA § 4(b)(1) because of the participation of one Fund
employee, particularly inasmuch as the activities of that employee on
which participation is based relate exclusively to conducting the affairs
of the Fund. However, if a benefit arrangement is extended 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. Based on your
representations concerning current operations of the Local Union, the
School District, and the Fund, it is the Department's view, therefore,
that the Fund constitutes a "governmental plan" within the
meaning of ERISA § 3(32) that is excluded from ERISA Title I coverage by
ERISA § 4(b)(1).(9)
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In closing, in view of the Fund’s prior position on being covered by Title
I of ERISA, we believe it is important that participants and beneficiaries
covered under the Fund are furnished with a written notice and explanation
informing them of the Fund’s current position that it is an excluded
governmental plan and advising them that any information they have received
about rights under Title I of ERISA no longer applies. It is our
understanding from you that the Fund will be furnishing such a disclosure.
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This letter constitutes an advisory opinion. It is issued under ERISA
Procedure 76-1, including section 10 thereof, concerning the effect of
issuing 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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School District retirees generally
are eligible to participate in the Fund only if they participated
prior to retirement, and they pay the entire cost of participation,
except if an individual's accumulated sick days at retirement entitle
him or her to participate in the Fund at School District expense for a
limited number of years. According to your representations, teachers
and secretaries who retire with 250 to 300 or more accumulated sick
days receive, at School District expense, between two and four years
of the Fund's welfare benefits.
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The Local Union's constitution, as
amended November 1993, provides at Article III for several membership
categories: active, special, and honorary. However, you represent that
there are no honorary members of the Local Union. Only active members
may vote in the Local Union's elections; Local Union members who leave
School District employment, including apparently through retirement,
are not considered active members of the Local Union and, accordingly,
are not entitled to vote in Local Union meetings. Special members of
the Local Union have full voting rights in their own “chapter,”
which is a “non-administrative” bargaining unit of School District
employees that is allowed by the Local Union's executive board to
affiliate with the Local Union. It appears that there are now two
chapters of the Local Union: a paraprofessional chapter and a
secretarial chapter. Each chapter's president is a voting member of
the Local Union's executive board, and the president of the Local
Union is a member of the team that negotiates with the School District
on behalf of each chapter.
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The Trust Agreement may be amended
by the executive board of the Local Union and may be terminated by the
trustees at the direction of that executive board and the Local Union
membership.
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The views expressed in this opinion
are not intended to address the status under Title I of ERISA of legal
services or vision benefits provided by the Local Union's statewide
affiliate, even if the Local Union subscribes to those benefit
arrangements on behalf of Fund participants and pays for them with
School District funds.
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Retirees may select any combination
of those three benefits, excepting that, unlike active employees,
accidental death does not result in payment of an extra amount of life
insurance benefits, and life insurance benefits are reduced by 50
percent at age 65 and terminate at age 70. The Fund provides the same
benefits to the six participating “confidential” clerical
employees that it provides to other active employees of the School
District in the clerical bargaining unit.
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You state that $62,000 of the amount
paid by the School District for that year represents an amount owed to
the Fund from a previous fiscal year.
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According to information that you
furnished by phone, the Fund's employee is provided only three
benefits: life insurance, legal services benefits, and vision
benefits.
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See, e.g., ERISA Opinions 86-10A and
85-21A. As defined in ERISA § 3(4), the term “employee
organization,” in pertinent part, includes “any labor union or any
organization of any kind, or any agency or employee representation
committee, association, group, or plan in which employees participate
and which exists for the purpose, in whole or in part, of dealing with
employers concerning an employee benefit plan, or other matters
incidental to employment relationships . . . .” It is
well-established that, in the Department's view, a school district
constitutes an agency, instrumentality, or political subdivision of
state or local government. See, e.g. ERISA Opinions 95-15A, 92-10A,
and 88-12A.
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The views expressed in this opinion
concerning the status of the Fund as a “governmental plan” are
based on your representations about the conditions for membership in
the Local Union and/or in its two current chapters and the conditions
under which individuals may participate in the Fund. We would have to
reconsider those views, if, for example, honorary membership in the
Local Union were granted to one or more individuals so as to allow
their participation in the Fund. Further, these views would be subject
to change if the representations on which this opinion is based were
determined to be inaccurate.
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