Annual bonus pool outside ERISA pension rules

             U.S DEPARTMENT OF LABOR
            Pension and Welfare Benefits Programs
                 Washington, D.C. 20216




                                                    OPINION 77-26 A

                                                    3(2)

Mr. Michael E. Dunn
Andrews Mosburg Davis Elam Legg & Bixler, Inc.
[Recipient address omitted]
Dear Mr. Dunn:
This is in reply to your letter concerning the Employee
Retirement Income Security Act of 1974 (ERISA). We
regret that the volume of correspondence has resulted
in a delay in responding.

You state that you represent Dyco Petroleum Corporation
(the Company), a firm which has established the Incentive
Compensation Plan and Trust Agreement (the Plan) for the
purpose of improving recruiting and retention of upper
management personnel. The Company is engaged in the oil
and gas industry and is in the business of owning, trans-
ferring, conveying, and selling oil and gas leasehold
interests. Prior to or concurrently with a sale, the
Company carries out an overriding royalty interest from
the leasehold interest and transfers the overriding
royalty interest to the Plan. Those overriding royalty
interests transferred to the Plan during a calendar year
are collectively referred to as a "Pool". Within a
reasonable time after the end of each calendar year, the
Trustee pays to the participants of each "Pool" their
respective shares of net income from the "Pool". You
request a ruling as to whether the Plan constitutes an
"employee benefit plan" within the meaning of ERISA.

The Department of Labor has adopted an advisory opinion
procedure (ERISA Procedure 76-1, copy enclosed) which
describes the general procedures for issuing information
letters and advisory opinions under ERISA. Pursuant to
ERISA Procedure 76-1, this letter is to have the effect
of an advisory opinion.

                                         OPINION 77-26 A
Section 3(3) of ERISA defines the term "employee benefit
plan" to include employee welfare benefit plan or an
employee pension benefit plan or a plan which is both a
welfare and a pension plan. Section 4(a) indicates that
such plans are subject to the provisions of Title I of
ERISA.

Section 2510.3-2 of regulations issued by the Department
on August 15, 1975 (copy enclosed) clarifies the defini-
tion of the term pension plan for purposes of Title I of
ERISA. As indicated in section 2510.3-2(c), the term
"pension plan" should not include payments made by an
employer to some or all of its employees as bonuses for
work performed unless such payments are systematically
deferred to the termination of covered employment or
beyond or so as to provide retirement income to employees.

Pursuant to the Plans' provisions, the Trustee pays to
the participants of each "Pool" their respective shares
of net income from each "Pool" within a reasonable time
after the end of each calendar year, or more often as the
Trustee determines at his discretion. Therefore, the
Plan qualifies as a bonus program described in section
2510.3-2(c). As such, it is neither a pension plan nor
an employee benefit plan and is not subject to the pro-
visions of Title I of ERISA.

Sincerely,



Fred W. Stuckwisch
Director
Office of Regulatory Standards
  and Exceptions

Enclosures