GATT for Governmental Plans

[Guest Jhagan]

Is a governmental plan required to amend their plan for GATT?

[Carol V. Calhoun]

To the extent that GATT affects the calculation of 415 limits, a governmental entity is required to comply with it. However, a governmental entity is not required to use GATT interest rates in calculating the actuarial equivalence of various benefit forms for purposes such as calculating survivor annuities, because it has no requirement to provide an actuarially equivalent survivor annuity.

[david rigby]

In our office, we have some governmental plan sponsors (mostly county-owned hospitals) that want to have a plan that closely resembles an ERISA plan, so many use GATT lump sum provisions.

However, I also had one such plan terminate a few years ago, after passage of GATT but before such provisions were adopted. The plan was underfunded, and we suggested that the adoption of GATT lump sum provisions would help alleviate that problem. The county attorney advised that adoption of such provision (at any time) would probably violate state law because the net effect was a "cutback" in the value of one of the optional forms of payment, even though that optional form was available only upon plan termination. This advice was confirmed by outside counsel.

[Guest Jose Rosario]

Is a county hospital plan considered maintained by an instrumentality of a local government for purposes of Notice 2001-46/401(a)(4)?

"Under the relief provided by this notice, governmental plans within the meaning of § 414(d), other than those maintained by State or local governments or political subdivisions, agencies or instrumentalities thereof, shall be treated as satisfying the requirements of § 401(a)(4), 401(a)(26), 401(k)(3), and 401(m) until the first plan year beginning on or after January 1, 2003."