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ERISA Prototypes with Governmental Plans


Guest Ralph Amadio
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Guest Ralph Amadio

A client's attorney asked an interesting question. "Are there any downside issues related to the use of ERISA prototype plans relative to local government and public school employers?"

The question relates to a case which we are mutually reviewing which requires the public agency to sign a fully ERISA qualified document, including top heavy tests, etc. The plan is an insurance company defined benefit "window" plan used as an incentive to retire older employees. If anyone has seen a case where a downside of any nature, please respond.

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You get into difficult interpretation issues. For example, a local governmental plan with a prototype document was integrating into the state retirement system. The plan document raised the issue of whether spousal consent and QJSA notice were required under 1.411(d)-4 Q&A 3(B)(1)(i)©. Many local governments have adopted prototype plans, and seem to get along with them okay.

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One thing to watch out about--a governmental plan is in most cases subject under applicable state or local law to more stringent vesting rules than IRC § 411 would apply. I don't know whether it is possible to get an actual addendum to the plan, but in any case, it is important for those charged with the administration of the plan to know that they cannot necessarily cut off future benefit accruals for existing employees just because the plan says they can.

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The opinions of my postings are my own and do not necessarily represent my law firm's position, strategies, or opinions. The contents of my postings are offered for informational purposes only and should not be construed as legal advice. A visit to this board or an exchange of information through this board does not create an attorney-client relationship. You should consult directly with an attorney for individual advice regarding your particular situation. I am not your lawyer under any circumstances.

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