Pension Benefit Guaranty Corporation 98-1 Februa ry 17, 1998 RE FE RE NC E: [*1] 402 1(b)(1 3) Plans C overed . Professional Se rvice Em ployer P lans OP INI ON : I write purs uant to y our r eques t f or rec onsi derat ion of the May 15, 1997, ini ti al de ter minat ion i ssu ed by t he Pens ion Be nefit Gua ranty C orp orati on (" PB GC ") that the * * * Defined Benefit Pension Plan (the "Plan") is subject t o the ter minat ion insuran ce pr ovisio ns of T itl e IV of the Employee Reti rement I ncome Securit y Act of 1974, as amended ("ERISA "), and is not excluded from coverage und er ERI SA § 4021(b)(13) as a plan mainta ined by a profess ional service employer. After thorough re view and an alysis, for t he reasons discus sed below, the PBG C sustains i ts ini tial det ermination and concludes that * * * is not a prof essi onal serv ice employ er as defi ned i n sec ti on 4021(c) (2) of ERISA, and therefore the Plan i s su bject to t he t ermi nati on provi sion s of Titl e IV of ERISA . Thus, upon reconsideration, we fi nd that the ini tial deter minatio n was c orre ct. As we understand the facts of this matter, * * * is a management consulting fi rm and is primarily engaged in the business of providing new business development and strat egic consulti ng services t o Fortune 500 C ompanies. The owner of the company * * * , had 15 y ears of expe rience [*2] in the field of management consulting prior t o starti ng the fi rm a nd has a degre e from the U niversity of Londo n. * * * oversees 100 % o f the managem ent of the firm's busine ss. It i s undisputed that at no time has the plan ha d mo re than 25 a ctive participants. Secti on 4021 (b)(13) of ERISA exclu des fr om coverage any plan "est ablis hed and maint ained by a profess ional servi ce employer t hat does not at any time af ter the date of enac tment o f this Act ha ve mo re than 25 a ctive P articipa nts in the pla n." Under § 4021 ( c)( 2) of ERISA, a profes sional servi ce employer is any enti ty owned or control led by prof essi onal individ uals where both the e ntity and the professional i ndividuals owning and controll ing it are engaged in the perf ormance of t he sa me prof essi onal serv ice. See PBGC Opinion L ett er 76- 106. As st ated in PBGC Opinion Lett er 76- 106, a prof essi onal i ndivi dual gener ally is one w ho provides s ervice s that require knowl edge of an adva nced t ype in a fi eld of science or learni ng cust omari ly acqui red by a prol onged cou rse of special ized in tel lec tu al in st ruc ti on an d st udy , a s di st in gui she d fr om a general ac ademic educat ion and f rom an app rentice ship or from training in the perf ormance [* 3] of rout ine ment al, man ual or physical process. The rendering of professional service s generally requires the co nsistent exercise of disc reti on an d judgment in its perf ormance and would usually be predominantly i ntellect ual in character . Ba sed o n our review of the re levant fa ctors, it ap pea rs that * * * is not a professional servi ce employer within t he meaning of ER ISA § 40 21 ( b)(1 3). * * * doe s not ha ve an a dva nced degr ee an d neith er * * * nor * * * are r equired un der state law to ho ld a sp ecific licen se in or der to perform duties as a management consultant . Moreove r, the broad range of ser vice s t hat * * * prov ide s are no t those t hat re quire kn owledge of a n advanced ty pe that is cu stomari ly ac quired through a prolonged course of special int ellectual instruct ion. * * * cont ends tha t it has been deemed a qu ali fi ed prof essi onal serv ice employ er by the IRS unde r Sect ion 448( b) of th e In ter nal Reve nue Code ( "IRC") . We di sag ree . I RC § 44 8(b) provides that "qualif ied personal servi ce corpora tions" shall be treated as indiv iduals fo r purp oses o f a partic ular m ethod of acc ountin g. T he de finit ions o f "qualif ied perso nal serv ice co rpo rations " und er IR C § 448 (d)(2 ) and "pr ofessio nal s ervice e mployer" [* 4] under ERISA § 4021(c)(2), however, are not, and were not int ended to be, coex tensi ve. Bec ause * * * canno t be d eem ed a p rofessio nal serv ice em ploye r as de fined b y ER ISA § 40 21( c)(2 ), the P lan is not excluded from coverage under ER ISA § 402 1(b)(13). This is a final decision by the PBGC regarding the Plan.

Charles Korb Manager, Processi ng and Technical Assis tance Branch Stan dard Termi nati on Compli ance Di vis ion Insura nce O pera tions D epa rtmen t