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Neil D. Lipton, Esq.
Spivak, Lipton, Watanabe, Spivak & Moss
1700 Broadway, 21st Floor
New York, New York 10019
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2002-11A
ERISA Sec. 3(32)
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Dear Mr. Lipton:
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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 Communications Workers of America, Local
1180 Members’ Annuity Fund (Fund). Specifically, the Fund, which now
covers only eligible employees of the City of New York (City) and of certain
public employers related to the City, proposes to extend eligibility to the
Fund’s trustees, all of whom are Local 1180 officers. You asked whether
the Department of Labor (Department) would consider the Fund, if modified as
proposed, to be a “governmental plan" within the meaning of ERISA §
3(32) and, thus, excluded from Title I coverage by ERISA § 4(b)(1).
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The Fund was established in 1999 pursuant to collective bargaining between
Local 1180 and the participating public employers.(1)
It is a defined contribution, profit-sharing annuity plan. About 9,000
employees and former employees of the City or of related public employers
participate in the Fund.(2) Each
covered employee works in a job title represented in collective bargaining
by Local 1180 and participates in either the New York City Employees
Retirement System or the New York City Board of Education Retirement System.
The City and related public employers that bargain with Local 1180 are the
Fund’s only sources of contributions.
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Five Local 1180 officers sitting ex officio are the Fund’s board of
trustees. They are Local 1180’s president, its first and second vice
presidents, its secretary-treasurer, and its recording secretary. Each
serves a three-year term unless, during a term as trustee, he or she fails
to retain the Local 1180 office that confers trustee status. Trustees may
hold union office while on “released time” from government employment,
thereby remaining eligible for continued participation in the Fund as
governmental employees, or they may hold office as Local 1180 employees
while on leave of absence from government employment. The Fund’s proposal
would permit participation by Fund trustees who, when no longer employed by
any governmental employer that contributes to the Fund, become employees of
Local 1180, and it would allow Local 1180 to contribute to the Fund on
behalf of any trustees it employs.
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The Trustees are responsible for, among other things, receiving
contributions, paying expenses, paying benefits, managing and investing Fund
assets, and adopting plan provisions and amendments. No trustees are
appointed by the City or by any of the related public employers that
contribute to the Fund, and the City and related public employers do not
participate in day-to-day management of the Fund. Beyond being parties to
collective bargaining agreements pursuant to which the Fund is established
and maintained, involvement with the Fund by the City and by related public
employers is limited to making contributions required by their collective
bargaining agreements with Local 1180. The Fund is also subject to the New
York City Comptroller’s right to audit its operations.
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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.” It is the view of the
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 that are governmental agencies. In this regard, the Department
has, in similar circumstances, interpreted the term "governmental
plan" to include a plan established or maintained pursuant to a
collective bargaining agreement between a governmental entity and a labor
union where the plan covered only employees and former employees of a
governmental entity and received substantial funding from the governmental
employer. See ERISA Advisory Opinions 86-24A, 86-23A and 86-22A (dated
September 9, 1986). The Department has also previously expressed the 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, we have noted that 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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For purposes of your request, we assume that the City is a “political
subdivision” of government within the meaning of ERISA § 3(32). Further,
without examining the issues involved, we assume that each City-related
public employer contributing to the Fund is a “political subdivision” or
“agency or instrumentality” of government within the meaning of that
section. In addition, we assume that all Fund participants are current or
former employees of the City or of such governmental entities. Based on
those assumptions, the Fund appears to be established and maintained
pursuant to collective bargaining between Local 1180 and governmental
entities described in ERISA § 3(32). Those governmental employers appear to
be the Fund’s only source of contributions, except that, as discussed
above, Local 1180 will begin contributing on behalf of the Fund’s trustees
who are Local 1180 employees. The Fund appears to cover only employees and
former employees of governmental entities that contribute to the Fund
pursuant to collective bargaining agreements with Local 1180. Accordingly,
based on your representations and the assumptions stated above, it is the
view of the Department that the Fund, as now structured and operated, is a
“governmental plan” within the meaning of ERISA § 3(32). Further, based
on your representations concerning how the Fund will be amended, it is the
Department’s view that making the Fund’s five trustees eligible would
not involve more than a de minimis number of private sector employees
participating in the Fund. Therefore, a plan amendment permitting all five
of the Fund’s trustees to become participants and allowing Local 1180 make
contributions to the Fund on their behalf would not, in the Department’s
view, adversely affect the “governmental plan” status of the Fund within
the meaning of ERISA § 3(32).
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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 to the Fund. It
expresses no views concerning whether the Fund, as modified, would meet
applicable requirements of state or local law, and it 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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In addition to the City, related
public employers that contribute to the Fund include, but are not
necessarily limited to: the New York City Health and Hospital
Corporation; the District Attorneys of New York, Kings, Bronx, and
Richmond Counties; New York City Comptroller; New York City Transit
Authority; New York City Board of Education; New York City Employees
Retirement System; and New York City Board of Education Retirement
System.
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After terminating employment covered
by the Fund, participants may maintain their accounts in the Fund, but
the Fund accepts no further contributions from them or on their
behalf.
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