County-owned hospital pension plan exemption

P/OPINION 76-105




                                               3(32)


                    September 21, 1976


Dear          :

Thank you for your letters dated March 26 and April 14,
1976, and the additional material you enclosed with your
letter dated June 4, 1976. I am sorry that we could not
reply sooner. You would like to know if the (named)
Hospital Pension Plan is a governmental plan within the
meaning of section 3(32) of the Employee Retirement Income
Security Act of 1974 (ERISA) and, therefore, exempt from
coverage under Title I, pursuant to section 4(b)(l).

According to the documents you submitted and the infor-
mation in your letters, the Hospital, an instrumentality
of (County, State), is owned by (County) under an Act of
the General Assembly of (State) dated May 30, 1968,
whereby the County was authorized to accept ownership of
the Hospital as a charitable gift from the Trustees. The
Hospital has agreed to continue the pension plan for its
qualified employees. The Plan is funded entirely by the
Hospital (no contributions are required from the
employees) and is administered by the Pension Committee,
appointed by the (County) Hospital Board.

Section 4(b)(l) exempts governmental plans from coverage
under Title I of the ERISA. Section 3(32) defines the
term "governmental plan", in part, to mean 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. Based on the
foregoing, it is concluded that the pension plan of the
Hospital is established and maintained by the Hospital, a
wholly owned instrumentality of the (County, State).
According, it is a “governmental plan” as defined in
section 3(32) of the ERISA and is exempt from coverage
under Title 1 pursuant to the provisions of section
4(b)(1).
P/OPINION 76-105




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However, even though a governmental plan is exempt from
coverage under Title I, many of the tax provisions of
Title II (which are administered by the Internal Revenue
Service) may apply. For example, governmental plans may
qualify under section 40l(a) of the Internal Revenue Code
in order to attain special tax treatment for employees who
participate under such types of plans. Although a
governmentl plan does not have to meet the alternative
minimum participation, vesting, and funding requirements
added to the Code by Title II, in order to attain quali-
fied status, it must satisfy the coverage requirements of
section 40l(a)(3) of the Code, the nondiscrimination rule
of section 40l(a)(4), and the vesting provisions of
section 40l(a)(7), as in effect prior to the enactment of
the ERISA. In addition, qualified governmental plans must
satisfy the requirements of section 415 of the Code
relating to contributions or benefits.

Sincerely,