Advisory Opinion 1994-26A

Dear Ms. Powers:

This is in response to your request on behalf of the Air Line Pilots Association, International (ALPA) regarding the applicability of the Employee Retirement Income Security Act of 1974 (ERISA). Specifically, you ask whether the ALPA Group Loss of License Disability Income Plan (the LLD Plan) and the ALPA Group Extended Total Disability Income Insurance Plan (the TDI Plan) are "employee welfare benefit plans" within the meaning of section 3(1) of ERISA.

You advise that ALPA is an unincorporated association that represents, for purposes of collective bargaining under the Railway Labor Act, 42,000 pilot members who fly for 44 commercial airlines. The Department of Labor (the Department) notes that ALPA files yearly as a labor organization (File No. 000179) under the provisions of the Labor-Management Reporting and Disclosure Act of 1959.

Section 3(4) of Title I of ERISA provides:

(4) The term "employee organization" means 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; or any employees' beneficiary association organized for the purpose in whole or in part, of establishing such a plan.

For the purposes of this opinion, we assume that ALPA is an employee organization within the meaning of ERISA section 3(4).

You represent that the LLD Plan was established in 1953 to provide group loss of license disability insurance to ALPA members who experience medical problems resulting in loss of the medical certificate issued to them by the Federal Aviation Administration, and who thus can no longer operate commercial aircraft. The TDI Plan was established in 1963 to provide long-term disability insurance benefits to ALPA members who are unable to work in any occupation. ALPA members must first participate in the LLD Plan in order to be a beneficiary under the TDI Plan.

The group insurance under the TDI Plan and the group insurance under the LLD Plan are both held in ALPA's name. You state that ALPA makes suggestions to the insurer that provides the disability insurance under the LLD Plan and the TDI Plan regarding the design and structure of the plans. You state that "[a]fter considering [ALPA's] input on plan design and structure, along with plan experience [in the LLD Plan] and market competition, the insurer sets the premium rates on an actuarial basis."

You further represent that ALPA provides its members with information regarding the LLD Plan and the TDI Plan, including a copy of a brochure that displays the ALPA logo and address and refers to the LLD Plan and the TDI Plan as "ALPA's Loss of License Program for the protection you need."

You represent that participation in the LLD Plan and the TDI Plan is voluntary and that participants in the LLD Plan and the TDI Plan may elect either to have premiums for these two plans deducted from their paychecks or to be billed for the premiums directly by ALPA. Premiums are collected by ALPA and forwarded to the insurer. In addition to forwarding members' premiums, you state that ALPA forwards to the insurer the LLD Plan premiums for all the pilots of one "major airline" employer. This employer pays to ALPA the LLD Plan premiums for its pilot employees pursuant to a negotiated collective bargaining agreement.

Apprentice members of ALPA may accept or reject an automatic participation in the LLD Plan during a probationary employment period. You represent that insurance premiums are not charged to the apprentice members who accept participation and that ALPA does not pay the premiums for this coverage. Further, you state, "[a]ny loss associated with this coverage is charged against [the LLD] Plan experience."

Section 3(1) of Title I of ERISA defines the term "employee welfare benefit plan" to include:

[A]ny 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 [29 USCS section 186(c)] (other than pensions on retirement or death, and insurance to provide such pensions).

Although the LLD Plan and the TDI Plan provide a benefit that is specified in ERISA section 3(1), in order to be employee welfare benefit plans, they must also, among other criteria, be established or maintained by an employer or an employee organization, within the meaning of section 3(1). You assert that ALPA does not establish or maintain the LLD Plan and the TDI Plan because the programs meet the requirements for group insurance programs set forth in regulations of the Department at 29 C.F.R. section 2510.3-1(j). Regulation section 2510.3-1(j) describes certain group or group-type insurance programs in which the involvement of the employer or employee organization in the operations of the program is so minimal that such involvement does not constitute establishment or maintenance of the arrangement for purposes of ERISA section 3(1). Thus, the issue presented in this case is whether the LLD Plan and the TDI Plan are group insurance programs as described in regulation section 2510.3-1(j) and therefore not "employee welfare benefit plans" within the meaning of ERISA section 3(1).

Regulation section 2510.3-1(j) provides:

(j) Certain group or group-type insurance programs.

For purposes of Title I of the Act and this chapter, the terms "employee welfare benefit plan" and "welfare plan" shall not include a group or group-type insurance program offered by an insurer to employees or members of an employee organization, under which

(1) no contributions are made by an employer or employee organization;

(2) participation in the program is completely voluntary for employees or members;

(3) the sole functions of the employer or employee organization with respect to the program are, without endorsing the program, to permit the insurer to publicize the program to employees or members, to collect-premiums through payroll deductions or dues checkoffs and to remit them to the insurer; and

(4) the employer or employee organization receives no consideration in the form of cash or otherwise in connection with the program, other than reasonable comp-ensation, excluding any profit, for administrative services actually rendered in connection with payroll deductions or dues checkoffs.

It is the Department's position that a program will be excluded from Title I of ERISA pursuant to regulation section 2510.3-1(j) only if the activities of the employer or employee organization do not exceed any of the limitations set forth in the regulation. In the Department's view, ALPA's involvement in the operations of the LLD Plan and the TDI Plan, as described below, exceeds certain limitations of regulation section 2510.3-1(j).

First, ALPA endorses the LLD Plan and the TDI Plan within the meaning of section 2510.3-1(j)(3). An employee organization will be considered to have endorsed a group or group-type insurance program if the employee organization expresses to its members any positive, normative judgment regarding the program. An employee organization may, in the course of permitting an insurer, insurance agent, or insurance broker to market a group or group-type insurance program to its employees or members, facilitate the publicizing and marketing of the program, but only to an extent short of endorsing the program.¹  In endorsement within the meaning of section 2510.3-1(j)(3) occurs if the employee organization urges or encourages members' participation in the program or engages in activities that would lead a member reasonably to conclude that the program is part of a benefit arrangement established or maintained by the employee organization.

The brochure that ALPA provides to its members specifically and clearly characterizes the LLD Plan and the TDI Plan as "ALPA's Loss of License Program." The ALPA logo and address are prominently displayed on the front of the brochure. We view this labeling and packaging as expressions of ALPA's positive, normative judgement regarding the program. An ALPA member, reading this brochure, would reasonably conclude that the program is part of a benefit arrangement established or maintained by ALPA.

Furthermore, ALPA's suggestions to the insurer on plan design and structure represent direct involvement in the LLD Plan and the TDI Plan in excess of that permitted by regulation section 2510.3-1(j)(3). Regulation section 2510.3-1(j)(3) limits the functions of the employer or employee organization with respect to the program to permitting the insurer to publicize the program to employees or members, collecting premiums through payroll deductions or dues checkoffs, and remitting them to the insurer.

Therefore, on the basis of the facts, representations, and documents provided, we conclude that ALPA's involvement in the LLD Plan and the TDI Plan exceeds the minimal and neutral involvement contemplated by ERISA section 2510.3-1(j). It is the opinion of the Department that the LLD Plan and the TDI Plan are established or maintained by ALPA and that they are employee welfare benefit plans subject to Title I of ERISA.

This letter constitutes an advisory opinion under ERISA Procedure 76-1. Accordingly, it is issued subject to the provisions of the procedure, including section 10 thereof relating to the effect of advisory opinions.