Hello:

I am researching a situation where we have an "agency or instrumentality" of a state government which is likely to make changes to its structure such that it would resemble more a private entity, and less an "agency or instrumentality."

Unfortunately I haven't found anything that provides guidance on how its existing benefit plans would be treated. It is currently treating them as exempt from ERISA but how should we handle the transition as the changes are made? This particular entity is obtaining 501©(4) status during this process.

I have seen a short email from Ms. Calhoun dated 8/02/2001 on this board, that basically says there is no clear answer on these issues. It's looking like that is still the case but would appreciate any input from this board as to any resources or articles that might help.

Thanks!

Albert:confused:

If the agency becomes a 501©4 will it file 990s (annual returns for txo) with the IRS? My understanding is that public entitlies are exempt from filing tax returns under IRC 111 because their income is not subject to income tax. Question is whether the agency will still receive state funding or other public money to operate as an agency or instrumentality of st./local gov. It is possible for an organizaton to be publicly financed or a municipal entity and still be considered a txo - there are rulings going back 30 years where a public library was deemed to be a 501©(3). You need to retain counsel to research this issue.

Thanks for your reply.

The plan is to file 990s, yes. As for the funding from the state; it will continue to receive public funding, but the state will have less and less control over naming board members and removing board members. My understanding was that the funding aspect will be only one factor in DOL/IRS consideration as far as "agency or instrumentality" is concerned.

Unfortunately "I" am the counsel retained to research this issue. :-)

The US dept of labor issues opinion letters on whether employers are subject to ERISA. The letters are issued by the Pension Welfare Benefit Administraton and should be available on the Dol's web site.