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2003-12A
ERISA Sec. 3(32)
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Albert C. Harberson, Esq.
Director of National Policy
The Council of State Governments
2760 Research Park Drive
Lexington, Kentucky 40578-1910
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Dear Mr. Harberson:
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This is in reply 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). Specifically, you ask
whether employees of The Council of State Governments (CSG) may
participate in the Kentucky Employees Retirement System (KERS) without
adversely affecting the status of KERS as a “governmental plan” within
the meaning of section 3(32) of ERISA.
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Your correspondence and other materials submitted in support of your request
contain the following facts and representations. CSG was founded in 1933 as
a nonprofit, nonstock organization. Its articles of organization describe
CSG as a “multi-branch organization of the states and U.S. territories.”
You represent that CSG’s member jurisdictions are “the States of the
United States, the District of Columbia, the Commonwealth of Puerto Rico,
the Territory of American Samoa, the Territory of Guam, the Territory of the
Virgin Islands, and the Commonwealth of the Northern Mariana Islands.” A
“Governing Board” and an “Executive Committee” manage CSG. The
Governing Board and the Executive Committee consist primarily of governors
of member jurisdictions, elected legislators, and other state officials,
including members of the state judiciary, secretaries of state, state
treasurers, and employees of state legislative bodies. You state that CSG is
a “publicly supported organization” pursuant to sections 509(a)(1) and
170(b)(1)(A)(vi) of the Internal Revenue Code (Code).
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CSG’s principal functions are serving as a resource for its member
jurisdictions and disseminating information on a wide variety of issues of
interest to state governments. Since 1967, CSG has made its headquarters
Lexington, Kentucky, where Kentucky, through the University of Kentucky
board of trustees, has given CSG a long-term lease for nominal
consideration. To fund CSG services, each member jurisdiction pays dues
based on its population. Dues provide about 37 percent of CSG’s income.
Although CSG accepts grants and corporate gifts, it derives its other income
primarily from its member jurisdictions through publications and conferences
it offers exclusively to appointed and elected officials. CSG assets would
be divided proportionally among its member jurisdictions if CSG were to
dissolve. You represent that eleven of CSG’s member jurisdictions have
statutes that identify CSG as “a joint governmental agency of . . . [the
enacting] state and of the other states which cooperate through it.” See,
e.g. Okla. Stat. tit. 74, § 429. Several member jurisdictions also exempt
CSG from tax as an “instrumentality of government.”
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CSG currently employs 168 individuals. Although most
CSG employees work in Lexington, CSG has offices in five other cities. You
propose that only CSG’s eligible, active employees will become members
of KERS. Current CSG retirees will not be eligible for participation and
will not receive KERS benefits.
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You represent that the Kentucky Retirement Systems is a state agency
administering three Kentucky governmental retirement programs: KERS, the
County Employees Retirement System (CERS), and the State Police Retirement
System (SPRS). As of June 30, 2002, the three programs together had 251,573
members, including active, inactive, and retired members. KERS, in which CSG
proposes to participate, has 99,464 members. KERS describes itself as a “cost-sharing
multiple-employer defined benefit pension plan” that covers substantially
all regular full-time members employed by any Kentucky “department, board,
or agency” directed to participate by executive order of the governor of
Kentucky. Participating employees contribute five percent of salary, and
KERS annually adjusts rates of employer contributions. To join KERS, an
employer must obtain the governor’s executive order indicating it is a
Kentucky “department.” Ky. Rev. Stat. Ann. § 61.520. No executive order
has been issued at this point on behalf of CSG.
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Section 4(b)(1) of ERISA 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.” The Department
previously issued advisory opinions interpreting the term “governmental
plan” to include a benefit plan established and maintained for its
employees by an association supported by assessments on the states and
jointly controlled by them through an official from each state forming the
association’s membership. See Advisory Opinion 81-82A (National
Association of Insurance Commissioners) and Advisory Opinion 83-24A
(Federation of Tax Administrators).
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CSG appears similar to the associations described in
ERISA Advisory Opinions 81-82A and 83-24A. It operates under joint control
of elected and appointed officials of its member jurisdictions and is funded
principally by dues and other payments from those member jurisdictions.
Although our prior opinions deal with a governmental association’s plan
for its own employees, the rationale for those opinions supports a
conclusion that such an association could participate in a multiple-employer
governmental plan without adversely affecting the plan’s status as a
governmental plan exempt from Title I of ERISA. Accordingly, based on the
facts and representations you provided, it is the view of the Department
that CSG employees may participate in KERS without adversely affecting its
“governmental plan” status.(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 relating to the effect of advisory opinions. This opinion relates
solely to the application of the provisions of Title I of ERISA. This letter
is not intended to express any view concerning any applicable state law and
is not determinative of any particular tax treatment under the Code. KERS
should confirm directly with the Internal Revenue Service whether
participation of CSG employees would adversely affect the ability of KERS to
continue to claim governmental plan status under section 414(d) of the 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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For purposes of this opinion, we
assume, without examining the issue, that KERS as it is currently
structured and operated is a "governmental plan" within the
meaning of ERISA § 3(32).
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