Municipal hospital benefit plans as governmental plans

P/OPINION 76-124

                                                     3(32)
                   December 10, 1976


Dear          :

Thank you for your letter dated May 20, 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, the (named) Memorial Hospital, a
municipal hospital, is administered by a Board of Managers
appointed by the Town of (named). Employees are under the
(State) Civil Service System. The Hospital makes the
total contribution to the (State) Non—Contributory Retire—
ment Plan. The Hospital also contracts with (named), Inc.,
for coverage, paying the entire premium for coverage of
employees. Dependents may be covered at the employee's
option, the additional premium being paid by the
employee.

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 above, it is concluded that the plans are
established and maintained for its employees by the
(named) Memorial Hospital, an instrumentality of (Town), a
political subdivision of (State). Accordingly, the
employee benefit plans are "governmental plans" as defined
in section 3(32) of the ERISA, and are exempt from Title I
pursuant to the provisions of section 4(b)(1).
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P/OPINION 76-124

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 401(a) of the Internal Revenue Code
in order to attain special tax treatment for employees who
participate under such types of plans. Although a
governmental 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 401(a)(3) of the Code, the nondiscrimination rule
of section 401(a)(4), and the vesting provisions of
section 401(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,