Advisory Opinion 2000-07A

Dear Mr. Rosenthal:

This responds to your request for an advisory opinion concerning the applicability of Title I of the Employee Retirement Income Security Act of 1974, as amended, ("ERISA") to the OCSEA Benefits Trust ("Trust"). The Trust provides welfare benefits to approximately 47,000 active employees of the State of Ohio (also referred to herein as "Ohio" or the "State"), to former employees of Ohio, and to dependents of such active or former employees. Based on these and other representations and on documents that you submitted, you request an opinion that the Trust is a "governmental plan," as defined in section 3(32) of ERISA, that is excluded from Title I coverage by section 4(b)(1) of ERISA.

You advise that the Ohio Civil Service Employees Association ("OCSEA") is a labor union that represents a majority of the employees of the State of Ohio who are covered by the State's public employee collective bargaining laws. Pursuant to collective bargaining between OCSEA and the State, OCSEA created the Trust in January 1993 to provide group life insurance, dental care benefits, and vision care benefits that the State had been providing to its union represented employees.⁽¹⁾ In addition to employees represented by OCSEA, employees represented by certain other labor unions participate in the Trust pursuant to negotiations between those unions and the State.⁽²⁾ All of the individuals eligible to participate in the Trust are current or former employees of the State or their dependents.

The Trust currently provides two additional benefits that are available to all covered participants at no cost to them. Specifically, in 1997, the Trust instituted "Working Solutions Services," which is described in your submission as an arrangement with a service organization that provides employees with information and referrals related to adult/elder dependents and special needs dependents, including children, and information on personal legal and financial matters.⁽³⁾ In 1998, the Trust added disability gap insurance that supplements disability benefits provided by the State to its employees.

The Trust is funded primarily by contributions made by the State under collective bargaining agreements between the State and the unions that represent participating employees. Trust participants contribute only for benefits that they elect, i.e., supplemental life insurance benefits and COBRA continuation coverage for dental and vision benefits. The "Working Solutions Services" benefits and disability gap insurance are paid out of the Trust's earnings and reserves. The State contributed over 90% of the total contributions to the Trust during fiscal years ending June 30, 1995, through June 30, 1998.

The trust agreement under which the Trust was originally created provided for governance of the Trust by eleven trustees to be appointed by OCSEA or, at OCSEA's discretion, by one or more other unions representing participants covered by the Trust. Since the inception of the Trust, OCSEA has appointed seven trustees and four other participating unions each has appointed one trustee.⁽⁴⁾ The first amendment to the trust agreement, effective April 14, 1993, designated as an additional, State-appointed trustee the person who serves as Management Co-Chair of the Joint Health Care Committee of the State of Ohio. The most recent amendment and restatement of the trust agreement, executed as of September 11, 1995, gave the State the sole right to appoint its own trustee representative. In addition to the appointment of a trustee, the State has certain responsibilities relating to the administration of the Trust. Under a July 1, 1993, agreement between the Trust and the Ohio Department of Administrative Services ("DAS"), DAS and/or other State agencies perform certain functions regarding, among other things, notifications of eligibility and coverage, collection and scrutiny of enrollment forms, deposits of employer contributions for Trust benefits, and payroll deductions for supplemental life insurance.

ERISA section 4(b)(1) provides that Title I of ERISA does not apply to any employee benefit plan that is a "governmental plan" as defined in ERISA section 3(32). Section 3(32) of ERISA 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."

It is the view 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 which are governmental agencies. In this regard, the Department has interpreted the term "governmental plan" to include plans established or maintained pursuant to a collective bargaining agreement between a governmental entity and a labor union where such plans are funded by, and cover only employees of, governmental entities.

Your submission indicates that the Trust was created pursuant to collective bargaining between Ohio and OCSEA, and continues to be subject to agreements between those entities and between the State and the other participating unions; the Trust provides benefits exclusively for individuals who are current or former employees of the State of Ohio or their dependents; and the State provides substantially all of the contributions to the Trust. The State also participates in the administration of the Trust through the appointment of a trustee and the performance of a number of functions related to the daily operations of the Trust. Based on this information, it is the view of the Department that the Trust is a "governmental plan" within the meaning of section 3(32) of ERISA and, by virtue of ERISA section 4(b)(1), is excluded from ERISA Title I coverage.

This letter constitutes an advisory opinion under ERISA Procedure 76-1 and, accordingly, 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 the provisions of Title I of ERISA and is not determinative of any particular tax treatment under the Internal Revenue Code.