Town pension plan as governmental plan

P/OPINION   76-117

                                                3(32)

                     October 30, 1976



Dear          :

Thank you for your letter of May 24, 1976, requesting a
determination under the Employee Retirement Income
Security Act of 1974 (ERISA). I am sorry we could not
reply sooner.

According to your letter and your conversation with
a member of my staff, all employees of the Town of (named)
are covered under a pension plan which is entirely funded
by the Town. The City Council determines the benefits to
be provided and to whom the contract is to be awarded.

Section 4(b)(1) 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 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 plan is
established and maintained for its employees by (Town), a
political subdivision of (State). Accordingly, it 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)(l).

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 partici-
pate under such types of plans. Although a governmental
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P/OPINION    76-117

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 rules 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,