Five credit union pension trusts covered by ERISA

U.S. Department of Labor Pension and Welfare Benefits Administration Advisory Opinion 1983-58A November 9, 1983

[Recipient address omitted]

Dear Mr. Groff:

This is in reply to your request for an opinion regarding coverage of five employee benefit plans under title I of the Employee Retirement Income Security Act of 1974 (ERISA).

These plans are: (1) the St. John's Brunswick Federal Credit Union Pension Trust, (2) the Loring Federal Credit Union Pension Trust, (3) the BIW Federal Credit Union Pension Trust, (4) the Oxford Federal Credit Union Pension Trust, and (5) the St. Famille Federal Credit Union Pension Trust.

We have examined filings made for the Plans with the Department of Labor (the Department) under title I of ERISA, identified respectively by the Nos. 010211682-001, 010240276-001, 010261795-001, 010211669-001, and 010216309-001. We have also examined, for the St. John's Brunswick Federal Credit Union Pension Trust, copies of The Manhattan Life Insurance Company Split Funded Prototype Employees Retirement Plan and Trust and Joinder Agreement No. 2 dated June 1, 1977; for the Loring Federal Credit Union Pension Trust, copies of the Adoptive Agreement dated October 15, 1975, to the Specimen Plan of the EGRET Growth Fund, Inc., and the Articles of Amendment thereto, the Adoption Agreement dated November 13, 1981, of the CUNA Mutual Insurance Society Prototype Deposit Administration Money Purchase Pension Plan and Trust, Form 5307 Short Form Application for Determination dated November 20, 1981, and the Internal Revenue Service (IRS) determination letter dated September 22, 1982; for the BIW Federal Credit Union Pension Trust, copies of the trust agreement between B.I.W. Employees Federal Credit Union and Alexander Ferguson, the Adoption Agreement dated October 6, 1982, for the CUNA Mutual Insurance Society Prototype Deposit Administration Money Purchase Pension Plan and Trust, the Form 5301 Application for Determination dated June 30, 1982, and the IRS determination letter dated December 18, 1973; for the Oxford Federal Credit Union Pension Trust, copies of the American Bankers Life Assurance Company of Florida Money Purchase Retirement Trust Plan - Prototype A Non-Integrated Adoption Agreement dated December 13, 1977, and the IRS determination letter dated October 6, 1977; for the St. Famille Federal Credit Union Pension Trust, copies of The Manhattan Life Insurance Company Split Funded Prototype Employees Retirement Plan and Trust (Defined Benefit), Joinder Agreement No. 2 dated January 12, 1976, The Manhattan Life Insurance Company Split Funded Prototype Employees Retirement Plan and Trust (Money Purchase) and Joinder Agreement No. 3 dated April 22, 1980. These documents and the documents on file with the Department indicate that the Plans were established and/or maintained respectively by the St. John's Brunswick Federal Credit Union, the Loring Federal Credit Union, the Bath Iron Works Federal Credit Union, the Oxford Federal Credit Union, and the St. Famille Federal Credit Union, (hereinafter referred to as the Credit Unions) to provide benefits to their employees.

ERISA title 1, section 4(a) specifies that ERISA title I applies to any employee benefit plan if it is established or maintained (1) by any employer engaged in commerce or in any industry or activity affecting commerce, or (2) by any employee organization or organizations representing employees engaged in commerce or in any industry or activity affecting commerce, or (3) by both, except for plans specifically exempt under section 4(b).

The term "employee benefit plan" is defined in ERISA title I, section 3(3) as "… an employee welfare benefit plan or an employee pension benefit plan or a plan which is both an employee welfare benefit plan and an employee pension benefit plan." The term "employee welfare benefit plan" is defined in ERISA title I, section 3(1) as "… any plan, fund, or program which was heretofore or is hereafter established or maintained by an employer or by an employee organization, or by both, to the extent that such plan, fund, or program was established or is maintained for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise, (A) medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, death or unemployment, or vacation benefits, apprenticeship or other training programs, or day care centers, scholarship funds, or prepaid legal services, or (B) any benefit described in section 302(c) of the Labor Management Relations Act, 1947 (other than pensions on retirement or death, and insurance to provide such pensions)." The term "employee pension benefit plan" is defined in ERISA title I, section 3(2)(A) as "… any plan, fund, or program which was heretofore or is hereafter established or maintained by an employer or by an employee organization, or by both, to the extent that by its express terms or as a result of surrounding circumstances such plan, fund, or program -- (i) provides retirement income to employees, or (ii) results in a deferral of income by employees for periods extending to the termination of covered employment or beyond, regardless of the method of calculating the contributions made to the plan, the method of calculating the benefits under the plan or the method of distributing benefits from the plan."

The elements of coverage under title I of ERISA are:

(1) the plan must be established or maintained by an employer or employee organization, as those terms are defined, or by both;

(2) jurisdiction under the commerce clause;

(3) the plan provides benefits to participants and beneficiaries as defined;

(4) the plan provides benefits specified in the definition of "employee welfare benefit plan" or "employee pension benefit plan"; and

(5) the plan is not exempt under section 4(b).

The following is a discussion of each of these points with respect to the Plans.

1. Establishment or Maintenance by Employer and/or Employee Organization.

The Plans were established and/or maintained by employers.

ERISA section 3(5) defines the term "employer" as "… any person acting directly as an employer, or indirectly in the interest of an employer, in relation to an employee benefit plan; and includes a group or association of employers acting for an employer in such capacity."

The Credit Unions clearly meet this definition.

2. Commerce Clause.

With respect to the commerce clause, ERISA section 4(a) provides that ERISA title I applies to employee benefit plans established or maintained (1) by any employer engaged in commerce or in any industry or activity affecting commerce, or (2) by any employee organization or organizations representing employees engaged in commerce or in any industry or activity affecting commerce, or (3) by both, except for plans specifically exempt under section 4(b).

ERISA Section 3(11) defines the term "commerce" as "… trade, traffic, commerce, transportation, or communication between any State and any place outside thereof." The term "industry or activity affecting commerce" is defined in ERISA Section 3(12) as "… any activity, business, or industry in commerce or in which a labor dispute would hinder or obstruct commerce or the free flow of commerce, and includes any activity or industry affecting commerce within the meaning of the Labor Management Relations Act, 1947, or the Railway Labor Act."

The term "industry or activity affecting commerce" has been given a liberal interpretation by the courts. The Supreme Court has held that the jurisdiction of the National Labor Relations Board under the Labor Management Relations Act definition is as broad as the jurisdiction of Congress over interstate commerce. See NLRB v. Fainblatt, 306 U.S. 601, 607, and cases cited therein (1939). Therefore, court decisions under the Labor Management Relations Act are useful in determining the application of sections 3(11) and (12) of ERISA In the case of NLRB v. Bank of America, 130 F. 2d 624 (9th Cir. 1942), cert. denied 318 U.S. 791 (1943), the court pointed out that such normal business activities as correspondence with other banks and business institutions, use of telegraph or telephone facilities involved the use of channels of interstate communications so that the bank was "engaged in interstate activities not describable otherwise than as commerce."

Therefore, the Credit Unions are included within the commerce clause of title I of ERISA.

3. Provision of Benefits Specified in Law.

Under title I of ERISA, in order to be covered, a plan must provide benefits specified in the law's definition of "employee welfare benefit plan" or "employee pension benefit plan".

The definition of the term "employee pension benefit plan" is contained in section 3(2)(A) of ERISA which provides:

(2)(A) Except as provided in subparagraph (B), the terms "employee pension benefit plan" and "pension plan" mean any plan, fund, or program which was heretofore or is hereafter established or maintained by an employer or by an employee organization, or by both, to the extent that by its express terms or as a result of surrounding circumstances such plan, fund, or program-- (i) provides retirement income to employers, or (ii) results in a deferral of income by employees for periods extending to the termination of covered employment or beyond, regardless of the method of calculating the contributions made to the plan, the method of calculating the benefits under the plan or the method of distributing benefits from the plan.

According to the annual reports (Form 5500) filed with the Department, the Plans provide benefits described in Section 3(2)(A) of title I of ERISA. None of the Plans is a severance pay arrangement or a supplemental retirement income payment within the meaning of section 3(2)(B) of ERISA.

4. Provision of Benefits to Participants or Beneficiaries.

ERISA title I covers only employee benefits plans, i.e., plans arising out of the employment context. Thus, in order to be covered, a plan must cover participants who are employees and/or former employees (including members of employee organizations) who are or may become eligible to receive benefits or whose beneficiaries may be eligible to receive benefits.

ERISA section 3(6) defines the term "employee" as "… any individual employed by an employer."

ERISA section 3(7) defines the term "participant" as "… any employee or former employee of an employer, or any member or former member of an employee organization, who is or may become eligible to receive a benefit of any type from an employee benefit plan which covers employees of such employer or members of such organization, or whose beneficiaries may be eligible to receive any such benefit."

ERISA section 3(8) defines a beneficiary as a person designated by a participant or by the terms of an employee benefit plan who is or may become entitled to a benefit thereunder.

The Plans provide benefits to employees (and their beneficiaries) of the Credit Unions. Thus, the Plans provide benefits to participants and beneficiaries as defined in title I of ERISA.

5. Not Exempt Under Section 4(b).

ERISA section 4(b) exempts certain employee benefit plans from coverage. The Plans do not fall under any of the section 4(b) exemptions. Conclusion

Therefore, the St. John's Brunswick Federal Credit Union Pension Trust, the Loring Federal Credit Union Pension Trust, and BIW Federal Credit Union Pension Trust, the Oxford Federal Credit Union Pension Trust, and the St. Famille Federal Credit Union Pension Trust are covered by title I of ERISA.

Sincerely,

Morton Klevan Deputy Administrator Pension and Welfare Benefit Programs