Pension Benefit Guaranty Corporation 96-2 July 8, 1996 RE FE RE NC E: [*1] § 4021(b)(2) OP INI ON : W e write in res ponse t o your reque st for recons ider ati on of PBGC's ini ti al de ter minat ion date d Septe mber 13, 1995, regarding cove rag e of th e abov e- ref ere nced pens ion pla n (Pl an) unde r Tit le IV of th e Empl oye e Ret ir emen t I ncome Sec urity Act of 1974, as amended ( ERISA). Pu rsua nt t o sect ion 4021(b)(2) of ERISA, t he ini tial determi nati on held t hat the P lan is no t a gov ernm ental p lan, and is cove red b y Title IV . We have consi dered your reque st for recon side rat ion a nd concl uded t hat the Plan i s a gov ernmen tal plan , an d is not cov ered by T itle IV o f ER ISA . Acc ord ingly, your requ est for re con sidera tion is gra nted. Backgrou nd We have assumed that the f ollowing fact s and represen tati ons made in y our submis sion ar e accurat e and complete. Th e Pla n spo nsor is the * * * The Company was for med on or about June 25, 1956, as a non- profit corporati on under th e laws of the sta te of Califo rnia, for th e sole p urpo se of o pera ting the * * * Califo rnia and Paci fi c Grove dr aft ed th e Company 's art icl es of incorporation and by-laws. Any disputes concerning the articl es and by-laws must be resol ved in favor of Calif ornia, and thos e documen ts may not be amended without the sta te 's [*2] co nsent. T he C omp any's bo ard o f directo rs is app ointed by a state agenc y, and a ll of it s off icer s mus t be chose n fr om the board. Under Cal if orni a la w, t he boar d is consi dered a sta te e nti ty whose meeti ngs mu st gener all y be open to th e p ub lic , a nd th e C om pa ny 's boo ks and reco rds ar e sub ject to p ublic disclosure. Als o, the top offi cer's s alary is deter mined by state law . Calif ornia owns the conf erence f acil ity and surr ounding propert y on whi ch the Co mpa ny con duc ts its opera tions, and uses it as a sta te park . Th e Co mpa ny is license d to o pera te the facility in a ccordan ce wi th t he t erms of a conce ssi on agreement with the state . n1 T he state is the Company's sing le l argest customer and exerci ses si gnif icant control over its operati ons and fi nances. The stat e determi nes who can u se the conferen ce faci lit ies and prescribes the fees that the Comp any may charge for thei r use. In practi ce, the st ate sets t he user fe es at a l ev el th at me re ly c ov er s th e C om pa ny 's opera ting costs; i.e. the Co mpa ny do es no t make a pro fit. All r evenue f rom operati on of th e faci lit y must be deposite d into a state- controlled trust account for the operation and maintenance of t he conference facili ty. The stat e [*3] sets t he leve l of cash the Company ma y hav e on han d, and receives any excess cash f rom operations. Mo reover, the Comp any may no t borr ow m one y withou t state ap pro val. n1 Accordi ng t o your submi ssi on, Cal if orni a te rmin ated the conces sion agre ement eff ecti ve Jan uary 31, 1995 . However, the s tate legi slat ure has authori zed the Company t o contin ue operat ing t he confer ence facilities until a succe ssor is ch osen . In 1975, t he Nati onal Labor Relat ions Board rul ed th at t he Company was a gover nment al e nti ty exempt from the National Labor Relations Act. The Internal Revenue Service (IRS) h as ruled th at the Company is a government instrum entality for purposes of the Internal Reven ue Co de. Similar findings have been m ade as a matt er of st ate law by a Califo rnia a ppellat e court a nd the s tate 's att orney gen eral. The Company has als o general ly conduc ted it s employee relations in accor dance wit h stat e l aws a pplicab le to public em ployees. H oweve r, the California Pub lic Emplo yees' Retirement System (CA LP ER S) ha s deter mined that the C omp any do es no t qualify as a publi c agency for purpos es of part ici pa ti on in t he s tat e employ ees' ret ire ment plan. Under t hat sta te l aw, CALPERS f ound t hat the indi vidu al [ *4] direc tors o f the Co mpa ny also h ad to be p ublic a genc ies. The P ension Plan

The Plan i s a def ined benef it pensi on plan established a nd maintained by the Com pany for its emplo yees. The Plan beca me eff ecti ve July 1, 1966 and was last amended and rest ated ef fect ive Jul y 1, 1987. The Company is the named Pla n admini str ator and funds the Plan. Alt hough the Plan document authorizes the appointment of a commit tee as the Plan administrator, none has ever b een a ppo inted. R ather, a ll decisions regarding t he Plan are made by the Com pany's board of dire ctors. T he C om pa ny ha s n ev er ma de P B G C pr em iu m f ili ng s o r p ay me nt s. I n f ac t, t he P la n's agents have conf irmed th at the Plan ha s been adm in is ter ed f rom i ts in cept ion as a gove rnme nt al pla n. The Pl an a dmin is tr ato r an nua ll y f il ed IRS Form 5500-G , Annual Report for Government and Ce rtain Church Plans, unt il t hat reporting requ irement was disco ntinued in 198 2. Legal Stan dard Secti on 402 1(b)(2 ) of ER ISA exc ludes from Titl e IV c ove rage a ny plan "estab lished a nd m aintaine d for its employees by the Government of the Unit ed Sta tes , by the gover nment of an y St ate or poli ti cal subdi vis ion t hereof , or by any agency or inst rumentalit y of the [* 5] foregoing... ." There is no definiti ve statut ory or regulatory def initi on of the term "gov ern ment al in st rume nt ali ty ." The PBGC, how ever , h as c ons ide red a numb er of no n-exclu sive facto rs in determining whethe r a plan is or is not t he plan of a government al i nstr umental ity . These i nclude: (i) whether the pl an or the pl an sponsor i s contr olled by a governmen tal entity; (ii ) whe ther the off icer s or me mbers of the plan spons or repr esent, or are selected by, a governmental ent ity; (iii) wheth er the p lan or th e plan spon sor is fund ed b y a government al entity ; (iv) whet her the plan' s participant s are treated as governmental employees; (v) w hether th e plan sponso r is tr eated under state or federal law as a governmental enti ty; ( vi) whether t here are any private i nt erest s involved; and (vii ) whether a governmental enti ty has t he powers and int eres ts of an y owne r. S ee e. g., PBGC O pini on Letters No. 83- 16 ( Ju ly 12, 198 3) , No . 8 1- 40 ( Dec emb er 9, 198 1) , No . 8 1- 37 ( No v ember 16, 1981), No. 81-31 (September 22, 1981 ), No. 81-30 (S eptember 22, 19 81), No. 81-13 ( May 13, 1981) , No. 79- 6 (Apri l 10, 1979), No. 78- 25 ( Oc tobe r 31 , 197 8), N o. 77 -152 (July 13 , 197 7), an d N o. 76 -95 (A ugust 2 , 197 6). The [*6] Depart ment of Labor and the I RS have consider ed simi lar factors in i nter pret ing sect ion 3( 32) of ERISA and section 414 (d) o f the Intern al Re venu e Co de, re spec tively. See ER ISA Op inion L etter 90 -09 (A pril 25 , 1 990 ); ER ISA Op inion L etter 89 -16 (A ugust 4 , 198 9); R ev. R ul. 89-4 9, 19 89-1 C.B . 117 . Discussion Upon reviewing your request for reconsiderati on and applyi ng the r elevant fact ors, we have deter mined tha t th e Plan is exclud ed fro m T itle IV coverage as a gov ernm ental p lan. Y our su bmiss ion d emo nstrates th at the state of Ca lifornia exerci ses signif icant cont rol ov er t he Company . For example, the arti cles of incorporati on and by-laws of the Company were subje ct to state a ppr ova l a nd the sta te ha s fi na l v et o p ow er ov er an y p ro po se d c ha ng es to th e C om pa ny 's governance. The board of direct ors is appointed by a s tat e agen cy, and al l of fi cers are c hosen fr om the board. The top officer's salar y is also d eterm ined b y state law. The conferen ce f a cili ty i n which the Company conduct s it s operati ons is owned by the stat e and was es tabli shed under state l aw to functi on as a governmental facil ity. The state decides who may us e the fac ility and [*7] sets user fees. All reve nue mus t be deposited into a trust account ov er wh ic h t he sta te ha s c on tr ol . T he sta te al so co nt ro ls t he C om pa ny 's ope rating b udge t and re ceive s any ex cess ca sh flow fro m op eratio ns. Mo reover, wi th th e e xc ep tio n o f th e C A LP E R S' determin at ion, the Com pany has gen erally been treated a s a government al entity or instru men tality unde r bo th state and federal law. CALPER S' determinat ion, however, was based on the f act that the Company' s direc tors a re not t hemselve s publi c agenci es. That part icul ar f act is not de ter minat ive for purp oses o f cove rage u nde r Title I V o f ER ISA . Conclusion For the reasons discus sed above, and o n the b asis of the inform ation p rovid ed to us, we co nclud e that the P lan is a gov ernm ental p lan within th e me aning o f section 402 1(b )(2) o f ER ISA , and is n ot co vered by T itle IV o f ER ISA . David Smith Chief, Administr ative Review & Technical Assistance Branch