You asked what constitutes a de minimis number of private sector participants in a public health care plan such that the public plan's ERISA-exempt status is not jeopardized.

SUMMARY

There is not a definitive percentage of private sector employees that can join a public health care plan under the “de minimis” rule through which a plan will not lose its ERISA-exempt status.

Based on federal advisory opinions considering specific “de minimis” cases, most public governmental health care plans in which private employees are allowed to participate without jeopardizing the plan's ERISA-exempt status have private sector employees constituting up to 1% of total plan participants.

The state could request a formal opinion from the U. S. Department of Labor (DOL) regarding a proposal to open the state plan to private employees.

ERISA

The federal Employee Retirement Income Security Act (ERISA, U. S. Code Title 29) governs certain activities of most employers who maintain employee welfare benefit plans and preempts many state laws in this area.

ERISA-covered welfare benefit plans must meet certain (1) fiduciary, reporting, and disclosure requirements and (2) benefit requirements (including benefits required under the federal Consolidated Omnibus Budget Reconciliation Act (COBRA), Health Insurance Portability and Accountability Act (HIPAA), Mental Health Parity Act, Newborns' and Mothers' Health Protection Act, and Women's Health and Cancer Rights Act).

ERISA, however, does not apply to a “governmental plan,” which it defines 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. ”

U. S. DOL OPINION CONCERNING ERISA APPLICABILITY

In 1999, the California School and Legal College Services of the Sonoma County Office of Education (the office) requested an advisory opinion from the U. S. DOL concerning the applicability of ERISA. Specifically, it asked if allowing 28 private sector employees to participate in the California Public Employees' Retirement System (CalPERS), which had about 750,000 members at the time, would adversely affect the status of CalPERS as a “governmental plan” within the meaning of ERISA.

In its opinion, DOL stated that “governmental plan status is not affected by participation of a de minimis number of private sector employees. However, if a benefit arrangement is extended to cover more than a de minimis number of private sector employees, the Department may not consider it a governmental plan” under ERISA (U. S. DOL Advisory Opinion 1999-10A, July 26, 1999, which is available at http: //www. dol. gov/ebsa/regs/AOs/ao1999-10a. html). In this case, the DOL allowed DOL further noted that its opinion related solely to the application of ERISA's provisions and “is not determinative of any particular tax treatment under the Internal Revenue Code. ” It advised the office to contact the Internal Revenue Service to clarify tax treatment of the proposed arrangement.

DE MINIMIS

To determine what “de minimis” means regarding how many private sector employees can participate in a government plan without jeopardizing the plan's ERISA-exempt status, we identified U. S. DOL advisory opinions that concluded that the number of private sector employees participating was de minimis for such purposes (see Table 1). The percentage of private sector employees referenced in the cited opinions ranges from 0. 004% to 2. 15% of total plan participants, with most having less than 1%.

Table 1: Private Participants in Public Plan

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