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Governmental Entity Liability for Funding a Non-Governmental Entity's Plan


EGB
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Is there any federal statute, regulation, rule, law or holding that would attribute funding liability of a non-governmental pension plan to a governmental entity if the non-governmental entity failed to fund its pension plan under a controlled group/joint and several liability theory? Assume the pension plan is subject to the funding requirements under IRC 412 and ERISA 302 and that the governmental entity is in the same controlled group as the non-governmental entity.

Common sense tells me this: Since governmental entities that maintain governmental plans are not required to fund their own plans under IRC 412 and ERISA 302, it follows that a governmental entity would not be required to fund a non-governmental entity's plan via a controlled group liability theory.

But, 412 and 302 state that there is joint and several liability within the controlled group for pension obligations, so this gives me some pause (despite that the sections state that the funding obligations do not apply to "governmental plans"). In my facts, we don't have a governmental plan, just a governmental entity, potentially within the controlled group of a non-governmental entity/plan.

And, of course, there are other issues like, how do you determine whether the governmental entity is in the same controlled group as the non-governmental entity? Is it even possible for a governmental entity to be in the same controlled group with a non-governmental entity? And, if you determined that they were in the same controlled group, would that necessarily mean that the non-governmental entity is also governmental (I don't think so - would be based on the facts and circumstances).

Any thoughts would be appreciated.

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I can't comment on most of this. But it is entirely possible to have a governmental entity in the same controlled group with a non-governmental entity. In Alley v. Resolution Trust Corporation, 984 F.2d 1201 (D.C.Cir. 1993), the court analyzed whether the Federal Asset Disposition Association (FADA), a savings and loan association established by the Federal Home Loan Bank Board, was a Federal instrument ality for governmental plan purposes. Its analysis focused on the employment relationship between the entity and its employees. In looking at the employer-employee relationship, the Alley court concluded that FADA functioned more like a private enterprise than a governmental agency in the area of its employment relations. “Measured by the terms and conditions of their employment, FADA personnel far more closely resembled private sector employees than they did government workers. Like employees of ‘ordinary’ Federally chartered S&Ls, FADA’s employees were outside the civil service system, and were not subject to the personnel rules or restrictions on salaries and benefits imposed generally on Federal employees." This decision was quoted with approval in the Advance Notice of Proposed Rulemaking regarding governmental plans.

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The opinions of my postings are my own and do not necessarily represent my law firm's position, strategies, or opinions. The contents of my postings are offered for informational purposes only and should not be construed as legal advice. A visit to this board or an exchange of information through this board does not create an attorney-client relationship. You should consult directly with an attorney for individual advice regarding your particular situation. I am not your lawyer under any circumstances.

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Thanks, Carol. II appreciate your input. I subscribe to your Answer Book and use it quite often! Just off the cuff, have you seen a case or anything else where a governmental entity has been held liable under a controlled group theory for a non-governmental plan? I have done some looking and have not seen anything. Again, my common sense answer is that this should not happen, but common sense doesn't mean much!

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  • 2 weeks later...

No, i haven't seen an instance of this. I suspect that it is one of many areas relating to governmental plans in which there just isn't case law.

Employee benefits legal resource site

The opinions of my postings are my own and do not necessarily represent my law firm's position, strategies, or opinions. The contents of my postings are offered for informational purposes only and should not be construed as legal advice. A visit to this board or an exchange of information through this board does not create an attorney-client relationship. You should consult directly with an attorney for individual advice regarding your particular situation. I am not your lawyer under any circumstances.

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