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Employee Benefits Security Administration

Advisory Opinion

November 19, 1999

Melvin H. Pizer, Esq.
Blitman & King
The 500 Building, Suite 1100
500 South Salina Street
Syracuse, New York 13202

ERISA Sec. 3(32)

Dear Mr. Pizer:

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 East Islip Teachers' Association, Local 2618, AFT Welfare Trust Fund (hereinafter, the Fund). The Fund provides welfare benefits to active employees of the East Islip Union Free School District No. 3 (hereinafter, the School District), to individuals retired from employment with the School District,(1) and to one individual employed by the Fund itself. Based on these and other representations and on documents that you submitted, you request an opinion concluding that the Fund is a "governmental plan," as defined in ERISA § 3(32) and, thus, that it is excluded from ERISA Title I coverage by § 4(b)(1).

You advise that the School District has signed an agreement with the East Islip Teachers' Association, Local 2618, American Federation of Teachers, AFL-CIO (hereinafter, the Local Union), to contribute to the Fund on behalf of eligible, active School District employees. You further state that the Local Union operates pursuant to a constitution and bylaws that provide for active members to elect Local Union officers, including the officers who serve on the Local Union's executive board,(2) and that the Local Union represents both teachers and certain other School District employees in collective bargaining. Moreover, the School District has recognized the Local Union as the exclusive bargaining agent for its employees who are teachers, nurses, clerical workers, and paraprofessionals, including aides for monitoring, instructional, clerical, and health duties.

According to the collective bargaining agreement between the School District and the Local Union, the Fund was established in 1975 to provide health and other welfare benefits to supplement the benefits that are unilaterally provided by the School District to its employees. The Fund operates under a Trust Agreement administered by four trustees appointed by the executive board of the Local Union. The Agreement also provides that neither the terms of the Trust nor any amendment to the Trust may be inconsistent with collective bargaining agreements in effect between the Local Union and the School District.(3) The Fund is currently required by collective bargaining agreement to furnish its current annual audit to the School District's superintendent of schools. In addition, at the School District's request through the New York Public Employment Relations Board, a certified public accountant recently audited the Fund and provided the School District with the results.

The Fund currently has a total of 677 participants: 520 active School District employees who are represented by the Local Union in collective bargaining; 150 retired School District employees; six clerical employees of the School District who, because they are “confidential” staff of the School District's superintendent, are ineligible for Local Union membership; and one employee of the Fund. The Fund provides different benefits for actively employed School District employees in different job classifications; among the benefits provided are life insurance; accidental death and dismemberment insurance; excess major medical benefits; excess dental benefits; legal services benefits; vision benefits; co-pay and deductible reimbursement; and funeral benefits.(4Retired School District employees may elect to receive only legal services benefits, major medical benefits, and life insurance.(5)

The School District contributes an average of approximately $1,200 on behalf of each participating teacher and secretary and an average of approximately $1,000 on behalf of each paraprofessional, for a total of $748,000 in contributions during the 1997-98 fiscal year (a year in which the Fund's revenues from all contributions totaled $762,680).(6)  Retirees' contributions for the 1997-98 fiscal year averaged about $94 each. The single Fund employee participant pays $555 for the 1997-98 fiscal year in order to participate in the Fund.(7)

You represent that, until recently, the Fund had taken the position generally that it was covered by Title I of ERISA and has submitted annual reports pursuant to ERISA Title I filing requirements, but the Fund now asserts that it is not covered by Title I because it constitutes a governmental plan within the meaning of ERISA § 3(32).

Section 3(32) of ERISA defines a "government plan" as "a plan established and 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 term "governmental plan" also includes a plan administered by an "employee organization," within the meaning of ERISA § 3(4), that provides benefits exclusively to employees of a political subdivision, agency, or instrumentality of local government who are also the only members of the employee organization, provided that the plan is funded exclusively by the government and by the government's employees who are members of the sponsoring employee organization.(8)

We note that the Fund covers, in addition to the employee-members of the Local Union, one non-governmental employee (i.e., the one employee of the Fund who also participates in Fund benefits). It is our view that inclusion of this one individual is not sufficient to alter the nature of the plan as a governmental plan. It would not be consonant with the intended scope and purpose of the “governmental plan” exception to treat the Fund as failing to fall within the exception in ERISA § 4(b)(1) because of the participation of one Fund employee, particularly inasmuch as the activities of that employee on which participation is based relate exclusively to conducting the affairs of the Fund. However, if a benefit arrangement is extended 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. Based on your representations concerning current operations of the Local Union, the School District, and the Fund, it is the Department's view, therefore, that the Fund constitutes a "governmental plan" within the meaning of ERISA § 3(32) that is excluded from ERISA Title I coverage by ERISA § 4(b)(1).(9)

In closing, in view of the Fund’s prior position on being covered by Title I of ERISA, we believe it is important that participants and beneficiaries covered under the Fund are furnished with a written notice and explanation informing them of the Fund’s current position that it is an excluded governmental plan and advising them that any information they have received about rights under Title I of ERISA no longer applies. It is our understanding from you that the Fund will be furnishing such a disclosure.

This letter constitutes an advisory opinion. It is issued under ERISA Procedure 76-1, including section 10 thereof, concerning the effect of issuing advisory opinions. This letter relates solely to the application of provisions of Title I of ERISA and is not determinative of any particular tax treatment under the Internal Revenue Code.

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


  1. School District retirees generally are eligible to participate in the Fund only if they participated prior to retirement, and they pay the entire cost of participation, except if an individual's accumulated sick days at retirement entitle him or her to participate in the Fund at School District expense for a limited number of years. According to your representations, teachers and secretaries who retire with 250 to 300 or more accumulated sick days receive, at School District expense, between two and four years of the Fund's welfare benefits.

  2. The Local Union's constitution, as amended November 1993, provides at Article III for several membership categories: active, special, and honorary. However, you represent that there are no honorary members of the Local Union. Only active members may vote in the Local Union's elections; Local Union members who leave School District employment, including apparently through retirement, are not considered active members of the Local Union and, accordingly, are not entitled to vote in Local Union meetings. Special members of the Local Union have full voting rights in their own “chapter,” which is a “non-administrative” bargaining unit of School District employees that is allowed by the Local Union's executive board to affiliate with the Local Union. It appears that there are now two chapters of the Local Union: a paraprofessional chapter and a secretarial chapter. Each chapter's president is a voting member of the Local Union's executive board, and the president of the Local Union is a member of the team that negotiates with the School District on behalf of each chapter.

  3. The Trust Agreement may be amended by the executive board of the Local Union and may be terminated by the trustees at the direction of that executive board and the Local Union membership.

  4. The views expressed in this opinion are not intended to address the status under Title I of ERISA of legal services or vision benefits provided by the Local Union's statewide affiliate, even if the Local Union subscribes to those benefit arrangements on behalf of Fund participants and pays for them with School District funds.

  5. Retirees may select any combination of those three benefits, excepting that, unlike active employees, accidental death does not result in payment of an extra amount of life insurance benefits, and life insurance benefits are reduced by 50 percent at age 65 and terminate at age 70. The Fund provides the same benefits to the six participating “confidential” clerical employees that it provides to other active employees of the School District in the clerical bargaining unit.

  6. You state that $62,000 of the amount paid by the School District for that year represents an amount owed to the Fund from a previous fiscal year.

  7. According to information that you furnished by phone, the Fund's employee is provided only three benefits: life insurance, legal services benefits, and vision benefits.

  8. See, e.g., ERISA Opinions 86-10A and 85-21A. As defined in ERISA § 3(4), the term “employee organization,” in pertinent part, includes “any labor union or any organization of any kind, or any agency or employee representation committee, association, group, or plan in which employees participate and which exists for the purpose, in whole or in part, of dealing with employers concerning an employee benefit plan, or other matters incidental to employment relationships . . . .” It is well-established that, in the Department's view, a school district constitutes an agency, instrumentality, or political subdivision of state or local government. See, e.g. ERISA Opinions 95-15A, 92-10A, and 88-12A.

  9. The views expressed in this opinion concerning the status of the Fund as a “governmental plan” are based on your representations about the conditions for membership in the Local Union and/or in its two current chapters and the conditions under which individuals may participate in the Fund. We would have to reconsider those views, if, for example, honorary membership in the Local Union were granted to one or more individuals so as to allow their participation in the Fund. Further, these views would be subject to change if the representations on which this opinion is based were determined to be inaccurate.