The Wagner Law Group | Est. 1996

Sophisticated Legal Solutions And Boutique-Style Service

Government Plan Not Covered by ERISA

by | Apr 27, 2023 |

In Pue v. New Jersey Transit Authority, the U.S. Court of Appeals for the Third Circuit has dismissed an ERISA-based lawsuit because government plans are not covered by ERISA.

Law.  ERISA section 4(b)(1) states that the law does not cover “government plans.” A government plan is defined 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.” An entity constitutes a political subdivision if it was either “(1) created directly by the state, so as to constitute departments or administrative arms of the government, or (2) administered by individuals who are responsible to public officials or to the general electorate.’”

The Department of Labor has ruled in Advisory Opinion 86-22A, among other rulings, that a plan funded by a government entity in amounts determined by a collective bargaining agreement is a government plan, and therefore excluded from ERISA.

Facts. A former employee sued his employer, a state transit authority, under ERISA and other laws, claiming it failed to pay certain collectively bargained retirement disability, vacation and holiday time benefits after he retired in 2017 due to debilitating work-related injuries. The employer responded that, as a government entity, it was not subject to ERISA. The District Court agreed with the employer and dismissed the employee’s ERISA claims. In response, the employee appealed the district court’s adverse decision to the Third Circuit Court of Appeals.

Appeals Court.  The Third Circuit ruled that the employee did not raise any arguments to refute the conclusion that the employer was a political subdivision exempt from ERISA. The court noted that the employer was “allocated within the Department of Transportation, [and]constituted as an instrumentality of the State exercising public and essential governmental functions.”  It further observed that the employer was governed by a board whose membership included the Commissioner of Transportation, the State Treasurer, a member of the Executive Branch selected by the Governor, and additional public members appointed by the Governor.

Therefore, the Third Circuit agreed with the District Court’s conclusion that the federal courts lacked subject-matter jurisdiction over the employee’s ERISA claims.