City pension plan as governmental plan

P/OPINION   76-127

                                                    3(32)

                     December 10, 1976



 Dear           :

Thank you for your letter dated March 15, 1976, requesting
a determination whether an employee pension plan admin-
istered by the City of (named) is exempt from title I of
the Employee Retirement Income Security Act of 1974
(ERISA). I am sorry we could not reply sooner.

 Section 4(b)(1) of the ERISA provides that title I shall
 not apply to any employee benefit plan if such plan is a
 governmental plan as defined in section 3(32). This
 section, in part, defines a governmental plan 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.

 Since the pension plan is administered by (City), a
 political subdivision of a State, it is concluded that 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)(l).

 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,
                           - 2 -

P/OPINION    76-127

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,