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Employee Benefits Security Administration

Advisory Opinion

April 30, 2004

2004-03A
ERISA Sec. 3(1)

David F. Thompson, Esq.
1051 Valley Road
Lake Forest, IL 60045

Dear Mr. Thompson:

This is in response to your request for an advisory opinion regarding the applicability of Title I of the Employee Retirement Income Security Act of 1974, as amended (ERISA), to the International Brotherhood of Electrical Workers Local No. 150 Holiday and Vacation Fund (Fund). Specifically, you ask for an opinion from the Department of Labor (Department) that the Fund is not an “employee benefit plan” within the meaning of section 3(3) of ERISA.

The correspondence and materials you forwarded contain the following facts and representations. The Fund has described itself in Form 5500 Annual Returns/Reports filed with the government as a “multiemployer plan” within the meaning of section 3(37) of ERISA subject to Title I. The plan document and the summary plan description furnished to covered participants state that “the purpose of the Plan is to provide vacation benefits for eligible Employees.” A bargaining agreement between Local Union No. 150 of the International Brotherhood of Electrical Workers (Union) and Lake County Division, Northeastern Illinois Chapter, National Electrical Contractors Association (Association) provides that the Association’s member employers will contribute to the “Vacation Trust Fund an amount equal to 5% of the Journeyman Wireman’s regular straight time hourly wage rate for each hour worked.” Under the Fund’s governing documents, employer contributions are paid directly to a separate trust that is intended to be a tax-exempt trust pursuant to section 501(c)(9) of the Internal Revenue Code and a trust fund as described in section 302(c) of the Labor Management Relations Act of 1947. The trust document provides that no part of the Fund will revert or be repaid to the Union, the Association, or a contributing employer.

On June 30 of each year, the Fund trustees credit separate accounts kept in the name of each covered employee an amount to reflect the employee’s share of employer contributions. In addition, a share of the income earned by the Fund and any appreciation in the value of Fund assets is credited to each covered employee’s account. The trustees also charge each account for benefits paid since the preceding accounting date, and may also charge each account to reflect a share of Fund expenses and any depreciation in the value of Fund assets. The plan provides that “as soon as practicable after December 1 of each year, the trustees will pay a vacation benefit to each participant” equal to the participant’s account balance as of the preceding June 30. Also, once each calendar year, and as of the first day of any month except November and December, an employee may request a withdrawal of his or her account value, subject to a 10% reduction.

The term “employee benefit plan” is defined in section 3(3) of Title I of ERISA to include “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.” Section 3(1) of ERISA defines “employee welfare benefit plan” in relevant part as “any plan, fund, or program . . . 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 . . . vacation benefits . . . [or] 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).” Regulations issued by the Department state that because holiday benefits are described in section 302(c) of the Labor Management Relations Act, the definition of employee welfare benefit plan includes plans that provide holiday benefits. See 29 C.F.R. 2510.3-1(a)(3).

In your letter you suggest that since Fund payments are made whether or not the employee actually takes a vacation or holiday, the Fund is “a system of payroll deductions by an employer for deposit in savings accounts owned by its employees” that is excluded by Department regulation 29 C.F.R. § 2510.3-1(a)(2) from those programs that constitute employee welfare benefit plans within the meaning of ERISA section 3(1). In our view, the Fund is not a payroll savings plan described in section 2510.3-1(a)(2). The Fund by its terms provides vacation and holiday benefits. Although the Fund trustees keep a separate account in the name of each covered employee, the Department has previously concluded that accounts held in trust are not treated as “owned” by the employees within the meaning of section 2510.3-1(a)(2). See Advisory Opinion 80-31A (May 22, 1980). Moreover, the Department has found that vacation pay plans such as the one you describe are ERISA-covered plans, even though benefits are generally paid at specified intervals (usually annually or semi-annually) and benefits are neither contingent upon the occurrence of a specified event nor restricted to use for a specified purpose when paid to the participant. See 29 C.F.R. § 2509.78-1, n.1; Advisory Opinion 78-7A (Mar. 13, 1978). Finally, the Department has stated that a vacation benefit plan’s status as an ERISA-covered plan is not dependent on whether a participant uses amounts designated as a vacation benefit to actually take a vacation or paid leave from work. See Advisory Opinion 79-14A (Mar. 2, 1979); Advisory Opinion 79-18A (Mar. 14, 1979).

The representations and other information you submitted indicate that the Fund is a trust fund established and jointly maintained by an employee organization and contributing employers for the purpose of providing covered participants with vacation and holiday benefits, which are among the benefits described in section 3(1) of ERISA. Accordingly, in the Department’s view, the Fund meets the definition of “employee welfare benefit plan” in section 3(1) of ERISA.(1)

This letter constitutes an advisory opinion under ERISA Procedure 76-1 (41 Fed. Reg. 36281, Aug. 27, 1976). Accordingly, this letter is issued subject to the provisions of the procedure, including section 10 relating to the effect of advisory opinions.

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

Footnotes

  1. Nothing in your submission indicates the Fund provides retirement income or results in a deferral of income by employees to termination of covered employment or beyond. Accordingly, this letter does not need to address whether the definition of “employee pension benefit plan” in ERISA section 3(2) would include the Fund.