Pension Benefit Guaranty Corporation 

98-1 

February 17, 1998 

REFERENCE: 

 [*1] 4021(b)(13) Plans Covered. Professional Service Employer Plans 

OPINION: 

I write pursuant to your request for reconsideration of the May 15, 1997, initial determination issued by the Pension

Benefit Guaranty Corporation ("PBGC") that the * * * Defined Benefit Pension Plan (the "Plan") is subject to the

termination insurance provisions of Title IV of the Employee Retirement Income Security Act of 1974, as amended

("ERISA"), and is not excluded from coverage under ERISA § 4021(b)(13) as a plan maintained by a professional

service employer.

After thorough review and analysis, for the reasons discussed below, the PBGC sustains its initial determination and

concludes that * * * is not a professional service employer as defined in section 4021(c)(2) of ERISA, and therefore the

Plan is subject to the termination provisions of Title IV of ERISA. Thus, upon reconsideration, we find that the initial

determination was correct.

As we understand the facts of this matter, * * * is a management consulting firm and is primarily engaged in the

business of providing new business development and strategic consulting services to Fortune 500 Companies. The owner

of the company * * * , had 15 years of experience [*2] in the field of management consulting prior to starting the firm

and has a degree from the University of London. * * * oversees 100% of the management of the firm's busine ss. It is

undisputed that at no time has the plan had more than 25 active participants.

Section 4021 (b)(13) of ERISA excludes from coverage any plan "established and maintained by a professional

service employer that does not at any time after the date of enactment of this Act have more than 25 active Participants

in the plan."

Under § 4021 (c)(2) of ERISA, a professional service employer is any entity owned or controlled by professional

individuals where both the entity and the professional individuals owning and controlling it are engaged in the

performance of the same professional service. See PBGC Opinion Letter 76-106.

As stated in PBGC Opinion Letter 76-106, a professional individual generally is one who provides services that

require knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of

specialized intellectual instruction and study, as distinguished from a general academic education and from an

apprenticeship or from training in the performance [*3] of routine mental, manual or physical process. The rendering

of professional services generally requires the consistent exercise of discretion and judgment in its performance and

would usually be predominantly intellectual in character.

Based on our review of the relevant factors, it appears that * * * is not a professional service employer within the

meaning of ERISA § 4021 (b)(13). * * * does not have an advanced degree and neither * * * nor * * * are required under

state law to hold a specific license in order to perform duties as a management consultant. Moreover, the broad range

of services that * * * provides are not those that require knowledge of an advanced type that is customarily acquired

through a prolonged course of special intellectual instruction.

* * * contends that it has been deemed a qualified professional service employer by the IRS under Section 448(b)

of the Internal Revenue Code ("IRC"). We disagree. IRC § 448(b) provides that "qualified personal service

corporations" shall be treated as individuals for purposes of a particular method of accounting. The definitions of

"qualified personal service corporations" under IRC § 448(d)(2) and "professional service employer" [*4] under

ERISA § 4021(c)(2), however, are not, and were not intended to be, coextensive.

Because * * * cannot be deemed a professional service employer as defined by ERISA § 4021(c)(2), the Plan is

not excluded from coverage under ERISA § 4021(b)(13). This is a final decision by the PBGC regarding the Plan.
Charles Korb

Manager, Processing and Technical Assistance Branch

Standard Termination Compliance Division

Insurance Operations Department