County sanitary authority pension plan exemption

P/OPINION   76-109

                                              3(32)

                     September 27, 1976



Dear          :

Thank you for your letter of March 18, 1976, and the
additional information in your letter of April 19, 1976,
requesting a determination whether the pension plan of the
(named) County Sanitary Authority (Authority) is a
governmental plan and, therefore, exempt from coverage
under Title I of the Employee Retirement Income Security
Act of 1974 (ERISA). I am sorry we could not reply
sooner.

The Authority was formed by action of the City Council of
(City) and the Board of Commissioners of (named) County
and by joinder of (City). It was chartered as an Author-
ity by (State). Its Board of Directors is appointed both
by (City) and (County). The pension plan is funded by
employer and employee contributions and is administered by
the Pension Committee. Although your letter states that
the Pension Committee is comprised of members appointed by
the employees and employer, the photocopy of Article VI
submitted with your letter of April 19, 1976 states that
the members of the Pension Committee are to be appointed
by the board. Also, the Board may remove members of the
Committee, with or without cause, appoint new members, and
increase or decrease the number of members. The Com-
mittee's decisions or actions are subject to reversal or
modification by the Board (Article X).

Section 4(b)(l) of the ERISA exempts governmental plans
from coverage thereunder. Section 3(32) defines the term
"governmental plan", in part, to mean a plan established
or maintained for its employees by the government of any
State or political subdivision thereof, or by any agency
or instrumentality of any of the foregoing.
                           - 2 -


P/OPINION    76-109

Based on the above, it is concluded that the pension plan
of the Authority is established and maintained by the
Authority, a political subdivision of the government of
(State). Therefore, the plan is a governmental plan as
defined in section 3(32) of the ERISA and is exempt from
coverage under Title I pursuant to the provisions of
section 4(b)(1).

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 govern-
mental 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 qualified 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 relat-
ing to contributions or benefits.

Sincerely,