Advisory Opinion 2003-12A

Dear Mr. Harberson:

This is in reply 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). Specifically, you ask whether employees of The Council of State Governments (CSG) may participate in the Kentucky Employees Retirement System (KERS) without adversely affecting the status of KERS as a "governmental plan" within the meaning of section 3(32) of ERISA.

Your correspondence and other materials submitted in support of your request contain the following facts and representations. CSG was founded in 1933 as a nonprofit, nonstock organization. Its articles of organization describe CSG as a "multi-branch organization of the states and U.S. territories." You represent that CSGs member jurisdictions are "the States of the United States, the District of Columbia, the Commonwealth of Puerto Rico, the Territory of American Samoa, the Territory of Guam, the Territory of the Virgin Islands, and the Commonwealth of the Northern Mariana Islands."  A "Governing Board" and an "Executive Committee" manage CSG. The Governing Board and the Executive Committee consist primarily of governors of member jurisdictions, elected legislators, and other state officials, including members of the state judiciary, secretaries of state, state treasurers, and employees of state legislative bodies. You state that CSG is a "publicly supported organization" pursuant to sections 509(a)(1) and 170(b)(1)(A)(vi) of the Internal Revenue Code (Code).

CSG's principal functions are serving as a resource for its member jurisdictions and disseminating information on a wide variety of issues of interest to state governments. Since 1967, CSG has made its headquarters Lexington, Kentucky, where Kentucky, through the University of Kentucky board of trustees, has given CSG a long-term lease for nominal consideration. To fund CSG services, each member jurisdiction pays dues based on its population. Dues provide about 37 percent of CSGs income. Although CSG accepts grants and corporate gifts, it derives its other income primarily from its member jurisdictions through publications and conferences it offers exclusively to appointed and elected officials. CSG assets would be divided proportionally among its member jurisdictions if CSG were to dissolve. You represent that eleven of CSGs member jurisdictions have statutes that identify CSG as "a joint governmental agency of . . . [the enacting] state and of the other states which cooperate through it." See, e.g. Okla. Stat. tit. 74, § 429. Several member jurisdictions also exempt CSG from tax as an "instrumentality of government."

CSG currently employs 168 individuals. Although most CSG employees work in Lexington, CSG has offices in five other cities. You propose that only CSG's eligible, active employees will become members of KERS. Current CSG retirees will not be eligible for participation and will not receive KERS benefits.

You represent that the Kentucky Retirement Systems is a state agency administering three Kentucky governmental retirement programs: KERS, the County Employees Retirement System (CERS), and the State Police Retirement System (SPRS). As of June 30, 2002, the three programs together had 251,573 members, including active, inactive, and retired members. KERS, in which CSG proposes to participate, has 99,464 members. KERS describes itself as a "cost-sharing multiple-employer defined benefit pension plan" that covers substantially all regular full-time members employed by any Kentucky "department, board, or agency" directed to participate by executive order of the governor of Kentucky. Participating employees contribute five percent of salary, and KERS annually adjusts rates of employer contributions. To join KERS, an employer must obtain the governors executive order indicating it is a Kentucky "department". Ky. Rev. Stat. Ann. § 61.520. No executive order has been issued at this point on behalf of CSG.

Section 4(b)(1) of ERISA provides that Title I of ERISA does not apply to a "governmental plan" as defined in ERISA § 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." The Department previously issued advisory opinions interpreting the term "governmental plan" to include a benefit plan established and maintained for its employees by an association supported by assessments on the states and jointly controlled by them through an official from each state forming the associations membership. See Advisory Opinion 81-82A (National Association of Insurance Commissioners) and Advisory Opinion 83-24A (Federation of Tax Administrators).

CSG appears similar to the associations described in ERISA Advisory Opinions 81-82A and 83-24A. It operates under joint control of elected and appointed officials of its member jurisdictions and is funded principally by dues and other payments from those member jurisdictions. Although our prior opinions deal with a governmental associations plan for its own employees, the rationale for those opinions supports a conclusion that such an association could participate in a multiple-employer governmental plan without adversely affecting the plans status as a governmental plan exempt from Title I of ERISA. Accordingly, based on the facts and representations you provided, it is the view of the Department that CSG employees may participate in KERS without adversely affecting its "governmental plan" status.⁽¹⁾

This letter constitutes an advisory opinion under ERISA Procedure 76-1, and is issued subject to the provisions of that procedure, including section 10 thereof relating to the effect of advisory opinions. This opinion relates solely to the application of the provisions of Title I of ERISA. This letter is not intended to express any view concerning any applicable state law and is not determinative of any particular tax treatment under the Code. KERS should confirm directly with the Internal Revenue Service whether participation of CSG employees would adversely affect the ability of KERS to continue to claim governmental plan status under section 414(d) of the Code.