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April 30, 1984

Charles DeLaFuente, Plaintiff
United States of America, Defendant.

The opinion of the court was delivered by: BARTELS

Memorandum Decision and Order

BARTELS, District Judge: Defendant United States of America made a motion before this court, on April 27, 1984, for an order granting summary judgment on the ground that plaintiff Charles DeLaFuente is not entitled to a federal tax refund as a matter of law.

 Plaintiff was employed by the New York Post from 1969 to 1978.During those years, he was a member of The Newspaper Guild of New York and was covered by collective bargaining agreements between the Post and the Guild. The agreement covering the period from March 31, 1978 to March 30, 1981 was in effect when plaintiff left the Post on May 19, 1978.

 In early 1978, new management at the Post sought to reduce the number of employees and encouraged voluntary resignations by a significant number of employees. On May 19, 1978, plaintiff voluntarily resigned and thereafter received a check fromthe Post for $25,164.09, of which $22,677.30 was severance pay pursuant to Article X of the collective bargaining agreement and $2,486.79 was vacation pay pursuant to Article VIII of the same agreement. Several months later, plaintiff received another check, for $683.20, as additional Article X severance pay.

 Plaintiff's W-2 statement for 1978, furnished to him by the Post, listed all of the above monies as ordinary income in the "wages, tips and other compensation" box, together with the salary earned by the plaintiff that year before he resigned. Plaintiff originally included the entire amount as ordinary income and paid a total of $8,507.00 in federal taxes that year. He later amended his return to show the $25,164.09 lump-sum payment as a pension plan distribution which gets favorable tax treatment under § 402(e) of the Internal Revenue Code, Title 26, and sought a refund of $5,749.00. Plaintiff's claim was denied and this action followed, plaintiff appearing pro se.

 The government now moves for summary judgment on the ground that, as a matter of law, Article X ("Severance Pay") of the Post-Guild contract is not a qualified pension plan under I.R.C. § 401(a), and therefore cannot receive favorable tax treatment under § 402(e).

 Section 401(a) provides that

 A trust created . . . and forming part of a . . . pension . . . plan of an employer for the exclusive benefit of his employees . . . shall constitute a qualified trust [thus qualifying for favorable treatment under § 402] . . .

 (1) if contributions are made to the trust by such employer . . . for the purpose of distributing to such employees . . . the corpus and income of the fund accumulated by the trust in accordance with such plan. . . .

 The government argues, and plaintiff concedes, that the Post never created a trust or contributed to any such trust to provide for the exclusive benefit of its employees, inlcuding the severance pay which plaintiff received. In fact, the government received a letter from the Post in February, 1984 (Government Exhibit E-1) stating that

 New York Post Corp. does NOT have a Pension Plan for Guild Employees. It contributes to News Paper Guild Publishers Pension (amount in contract). The severance payment to Mr. DeLaFuente was NOT covered under a qualified IRS Pension Plan.

 The government claims that the most basic requirement of a § 401(a) qualified pension plan is that there be a trust fund, which does not exist in this case. Article X of the labor contract provides for severance pay to employees under certain conditions, increasing with years of employment like a pension plan, but imposes no duty on the Post to set up a fund or hold money in any trust for employees who might or might not qualify. *fn1"

 In conclusion, the government argues that the severance payment, not made out of any trust fund, must obviously be ordinary income not deriving from any qualified pension plan and, thus, not subject to favorable tax treatment. Furthermore, nothing in the Employee Retirement Income Security Act of 1974 (("ERISA") requires an employer to fund potential severance pay liabilities or otherwise changes the result.

 Plaintiff argues that (1) although the Post never actually set up a trust fund, the Post's Sevrance Pay Plan is covered by ERISA and the Post was required by ERISA to set up such a fund, and its failure to do so should not deprive plaintiff of the favorable tax treatment that he would otherwise have been entitled to had the Post acted in accordance with the law, and (2) there is a question of fact as to whether the Post's ...

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