Advisory Opinion 1999-06A

Dear Mr. Tanner:

This is in response to your correspondence concerning the application of Title I of the Employee Retirement Income Security Act of 1974 (ERISA) to the proposed participation of the employees of the Kentucky Magistrates and Commissioners Association, Inc. (KMCA) in the County Employees' Retirement System (CERS), which is administered by the Kentucky Retirement Systems (KRS). Specifically, you request an advisory opinion that the status of CERS as a "governmental plan" within the meaning of section 3(32) and section 4(b)(1) of Title I of ERISA would not be adversely affected if employees of KMCA were permitted to participate in CERS. Pursuant to your request, we are assuming without ruling on this issue that CERS, as currently operated, is a governmental plan under ERISA.

KMCA is a nonprofit, nonstock, organization (formed in 1959 pursuant to Ky. Rev. Stat. Ann. § 273.160 to 273.290)⁽¹⁾ whose purpose is to promote the exchange of information among magistrates and commissioners about issues affecting county government and possible solutions and to promote legislation which would allow magistrates and commissioners to operate their local county governments more effectively. (Article II of Articles of Incorporation).⁽²⁾ Specifically, it provides information and training for members on a wide variety of issues related to county government. Such topics include planning and zoning, operation of the county jail, solid waste mandates, local taxation, economic development policies, cable television franchises, cellular telephone towers, disaster and emergency services, national flood insurance program, rural water development, and transportation. KMCA also provides information on the effect of changes of law on county government operations and assists government officials in developing local ordinances by providing research and sample ordinances. It acts as liaison to other local, regional and state agencies and serves as the representative for magistrates and county commissioners on state commissions and authorities. In addition, the president and executive director testify before committees of the Kentucky General Assembly on the effect of legislation on county government.

KMCA is administered by a board of directors, consisting of elected county officials who are magistrates or commissioners, which meets at least quarterly and which determines the management policy of KMCA. If there is a vacancy on the board, the remaining directors appoint a member. The board of directors is comprised of KMCAs officers' (President, two Vice Presidents, Secretary, Treasurer, and a Sergeant at Arms, all of whom are elected for one-year terms)(3), the immediate past president and four directors. The president exercises general supervision over the affairs of KMCA and appoints five standing committees whose members are all magistrates or commissioners. The staff consists of two employees: a director and an administrative assistant, who serve at the direction of the board of directors. Only employees of KMCA are proposed to participate in CERS.⁽⁴⁾ These employees are subject to income tax withholding for FICA but not for FUTA. Aside from KMCA's proposed participation as an employer in CERS, KMCA sponsors no other retirement plan. KMCA is subject to the state open meetings and open records laws.

The voting members of KMCA are magistrates and commissioners, who meet at least three times annually. The payment of their dues out of the county's annual budget is approved by each county fiscal court, and the amount of dues paid by each county varies in accordance with the county's population. The membership may amend the bylaws by 2/3 vote of those present.⁽⁵⁾

KMCA was not created by special statute, but opinions of the state attorney general, as well as certain statutes and resolutions, recognize its role as the representative of magistrates and commissioners in the state. Furthermore, KMCA falls within a general category of entities that state law has defined as "counties" for purposes of eligibility for the retirement system. Specifically, Ky. Rev. Stat. Ann. § 78.510(3) defines a county to include a nonprofit organization created and governed by a county, counties, or elected county officers.⁽⁶⁾

Fifty one percent of KMCA's revenue is derived from dues paid by county governments; 8% from convention earnings; 17% from marketing the insurance program of the Kentucky Association of Counties Advance Revenue Program; and 23% from endorsing a health plan available only for employees of counties and related entities.(7) KMCA is exempt from federal and state income tax but pays property, ad valorem and sales taxes.

Section 4(b)(1) excludes from coverage under Title I of ERISA any plan that is a "governmental plan," and section 3(32) defines the term "governmental plan," in pertinent 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."

In view of the foregoing representations, it is the view of the Department of Labor that KMCA is a governmental agency or instrumentality within the meaning of section 3(32) of ERISA and that inclusion of KMCA's employees in CERS would not of itself adversely affect the status of CERS as a "governmental plan" under Title I of ERISA. This letter relates solely to the application of the provisions of Title I of ERISA and is not determinative of any particular tax treatment under the Internal Revenue Code.

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