IRS Issues Advance Notice of Proposed Rulemaking on Governmental Plans | Practical Law

IRS Issues Advance Notice of Proposed Rulemaking on Governmental Plans | Practical Law

On November 7, 2011, the Internal Revenue Service (IRS) issued two advance notices of proposed rulemaking on the definition of governmental plan under the Internal Revenue Code (IRC), addressing the determination of governmental plan status for retirement plans in general and for Indian tribal government plans in particular.

IRS Issues Advance Notice of Proposed Rulemaking on Governmental Plans

Practical Law Legal Update 5-518-4888 (Approx. 3 pages)

IRS Issues Advance Notice of Proposed Rulemaking on Governmental Plans

by PLC Employee Benefits & Executive Compensation
Published on 08 Nov 2011 • USA (National/Federal)
On November 7, 2011, the Internal Revenue Service (IRS) issued two advance notices of proposed rulemaking on the definition of governmental plan under the Internal Revenue Code (IRC), addressing the determination of governmental plan status for retirement plans in general and for Indian tribal government plans in particular.
On November 7, 2011, the IRS issued two advance notices of proposed rulemaking on the definition of governmental plan under IRC Section 414(d). The first notice contains guidance that:
  • Defines certain key terms under Section 414(d), including "State" and "political subdivision of a State."
  • Sets out a facts and circumstances analysis for determining whether an entity is an agency or instrumentality of the US or a state or its political subdivision.
  • Describes the factors used in this analysis, which are categorized as major factors and other factors.
  • Requests comments on the creation of a safe harbor standard under which an entity would be treated as an agency or instrumentality of a state or its political subdivision if it satisfied certain criteria.
  • Requests comments on transition rules and transitional relief.
The second notice addresses plans established and maintained by an Indian tribal government or by its subdivisions, agencies or instrumentalities. Under the Pension Protection Act of 2006, these plans are considered governmental plans if substantially all of the participants work to perform essential government functions. The notice describes the rules under consideration for determining whether a plan of an Indian tribal government qualifies as a governmental plan under IRC Section 414(d).
Comments on the IRS notices are due 90 days after publication in the Federal Register.
For an overview of laws that apply to employee benefit plans, see Practice Note, Employee Benefits Law: Overview.