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Employee Benefits Security Administration

Advisory Opinion

December 21, 2005
Ms. Linda Knudsen
Pension Administrator
Utah Transit Authority
3600 S. 700 West
P.O. Box 30810
Salt Lake City, Utah 84130-0810

2005-21A
ERISA Sec. 3(32)

Dear Ms. Knudsen:

This responds to your request for an advisory opinion concerning the applicability of Title I of the Employee Retirement Income Security Act of 1974 (ERISA), to the Utah Transit Authority Hourly Employees Retirement Plan (Plan). Specifically, you asked whether the Plan’s status as a “governmental plan” within the meaning of section 3(32) of ERISA would be adversely affected if it were amended to allow two Utah Transit Authority (UTA) employees to continue to participate while on leave of absence to perform duties as full-time elected officials of the Amalgamated Transit Union Local 382 (Local 382), which is the labor union representing UTA employees who participate in the Plan.

Your request and related correspondence contain the following facts and representations. UTA was incorporated on March 3, 1970, as a public transit district pursuant to the Utah Public Transit District Act of 1969. UTA was established for the purpose of providing a public mass transportation system for various Utah communities, including bus, light rail, paratransit service, rideshare and van pool programs. Utah Code Ann. § 17A-2-1001, et seq. You represent that UTA is a political subdivision of the State of Utah, and that it operates in its own right and exercises jurisdiction without being restricted to municipal, corporate or county limits. Utah Code Ann. § 17A-2-1002. UTA may take by grant, purchase, bequest, devise or lease and may hold, enjoy, lease, sell, encumber, alienate, or dispose of real or personal property within the district. Utah Code Ann. § 17A-2-1016(2)(e). UTA may exercise the power of eminent domain. Utah Code Ann. § 17A-2-1016(4). Bonds issued by the UTA are considered municipal bonds subject to the limitations of the Utah Municipal Bonds Act. Utah Code Ann. §§ 17A-2-1028; 11-14-1, et seq.

UTA is governed by a fifteen-member Board of Trustees (Board), which is the legislative body of the UTA and is empowered to enact ordinances necessary to carry out its statutory responsibilities. Utah Code Ann. §§ 17A-2-1039. Members of the Board are appointed by the legislative bodies of each municipality or combination of municipalities, counties or unincorporated areas that comprise the transit district. Utah Code Ann. §§ 17A-2-1038, 1039. Trustees serve for a term of three years with a maximum of two terms and the appointing authority fills trustee vacancies. Utah Code Ann. §17A-2-1038.

UTA’s largest source of operating revenue comes from a local option sales tax imposed on the areas serviced by UTA. The balance of UTA’s operating revenue comes from passenger fares, advertising revenues, federal capital grants for preventive maintenance, federal planning grants, interest and other income. The majority of UTA’s funds are invested with the Public Treasurer’s Investment Fund which is managed by the State of Utah’s Treasurer’s office.

UTA employs about 1,600 individuals. UTA has a collective bargaining agreement with Local 382 that covers most UTA employees for whom the Plan provides pension benefits. You represent that UTA employees are subject to the conflict of interest and ethics provisions applicable to all Utah public employees and are considered government employees for purposes of the Utah Governmental Immunity Act.

The Plan was established in 1971 pursuant to collective bargaining between UTA and Local 382. It is a defined benefit pension plan and has approximately 1,150 participants. Originally the Plan was funded both by employer and employee contributions. However, in 1992 the mandatory employee contributions were discontinued and UTA has funded 100% of the annual contributions required by the Plan. The Utah Transit Authority Hourly Employee Retirement Plan Advisory Committee (Plan Advisory Committee) administers the Plan. The Plan Advisory Committee is comprised of nine trustees. The UTA Board selects seven trustees for the Plan Advisory Committee, five of whom are members of the UTA Board and two of whom are members of the UTA’s management staff. Local 382 selects the remaining two trustees from its membership.

You indicate that when UTA employees are elected by the Local 382 membership to the offices of President/Business Agent and Financial Secretary/Treasurer of Local 382, the individuals will become employed by Local 382 and will be on leave of absence from UTA while they serve their term. You propose that during any such leave of absence the two union officers will continue to participate in the Plan and UTA will continue to make contributions to the Plan on their behalf under the same conditions as for active UTA employees.

ERISA section 4(b)(1) provides that Title I of ERISA does not apply to a “governmental plan” as defined in section 3(32) of ERISA. That section defines the term “governmental plan,” in relevant part, 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.”

The terms “political subdivision,” “agency,” and “instrumentality” are not defined in ERISA, and no regulations issued pursuant to ERISA interpret those terms. Accordingly, whether an entity is a political subdivision, agency or instrumentality of government for purposes of ERISA section 3(32), depends on the facts and circumstances of the relationship between government and the entity whose benefit arrangement's status as a “governmental plan” is in issue.

Further, it has long been the position of the Department of Labor (Department) that the term “governmental plan” as defined in ERISA section 3(32) is not limited to plans established by the unilateral action of employers that are governmental entities and plans that are within the exclusive control of governmental entities. See Advisory Opinion 79-36A. Rather, in determining whether a plan that covers only employees and former employees of a governmental entity is “established or maintained” by that governmental entity for its employees, the Department has examined the extent to which a plan is funded by the governmental entity and the extent to which the governmental entity is involved in the administration or control of the plan. See id.; Advisory Opinion 79-83A; Advisory Opinion 86-24A.

In this case, based on the information submitted, it appears that the Plan was established and is maintained pursuant to collective bargaining between UTA and Local 382, it covers only current and former employees of UTA, it receives substantial funding from UTA, and UTA has a significant role in the discretionary administration and control of the Plan by virtue of its authority to appoint seven of the Plan’s nine trustees. Further, UTA appears to be a political subdivision, agency, or instrumentality of state or local government within the meaning of section 3(32) of ERISA.(1)  Accordingly, it is the Department’s view that the Plan constitutes a “governmental plan” within the meaning of section 3(32) of ERISA and, thus, is not subject to the provisions of Title I of ERISA pursuant to section 4(b)(1) of ERISA.

The Department has previously expressed the view that participation by a de minimis number of private sector employees in a plan that otherwise meets the definition of a “governmental plan” in ERISA section 3(32) will not adversely affect the plan’s status as a governmental plan. However, we have noted that if a benefit arrangement were to cover more than a de minimis number of private sector employees, the Department may not consider it a governmental plan under Title I of ERISA. It is the Department's opinion that permitting two employees of Local 382 to participate in the Plan while they are serving as employees of Local 382 on leave of absence from UTA would not involve more than a de minimis number of private sector employees participating in the Plan. Therefore, the Plan amendment you described permitting two Local 382 officers to continue to participate in the Plan would not, in the Department’s view, adversely affect the Plan’s status as a “governmental plan” within the meaning of ERISA section 3(32).

This letter constitutes an advisory opinion under ERISA Procedure 76-1, and is issued subject to the provisions of that procedure, including section 10 thereof, concerning the effect of advisory opinions. This letter relates solely to the application of provisions of Title I of ERISA. It does not express any view regarding whether the Plan, as modified, would meet applicable requirements of state or local law, and is not determinative of any particular tax treatment under the Internal Revenue Code.

Sincerely,
John J. Canary
Chief, Division of Coverage, Reporting and Disclosure
Office of Regulations and Interpretations

Footnotes

  1. We note that you represented that UTA is a political subdivision of the State of Utah. Distinguishing an “agency or instrumentality” of government from a “political subdivision” is without legal significance for purposes of determining whether a plan is a governmental plan exempt from Title I coverage. This letter should not be read as expressing any opinion on whether UTA is a “political subdivision” within the meaning of ERISA section 3(32). In that regard, we note that you provided us with a copy of a September 1981 letter from the Pension Benefits Guarantee Corporation concluding that the Plan is not subject to Title IV of ERISA because UTA is “a governmental instrumentality” within the meaning of ERISA section 4021(b)(2).