Governmental Plan Expenses

[Randy Watson]

What "rules" govern the payment of plan expenses from governmental plan assets? Do governments use plan assets to pay expenses? If so, on what basis do they pay those expenses?

The "exclusive benefit" rule under the Code and Regs don't specifically address expenses. I'd like to think that this rule would work similar to ERISA's "exclusive purpose" rule, which obviously doesn't apply to governmental plans.

I'm not very familiar with gov't plans and don't want to assume anything. Any help would be appreciated. Thanks.

[QDROphile]

You have to consider state law and regulations, if any, because state law is not pre-emppted and a government retirement plan has to be authorized by state law in some way. Not a specific answer and the task will vary form state to state and plan to plan. Don't expect a direct answer to your question, even if you find all the relevant state law.

[Randy Watson]

You have to consider state law and regulations, if any, because state law is not pre-emppted and a government retirement plan has to be authorized by state law in some way. Not a specific answer and the task will vary form state to state and plan to plan. Don't expect a direct answer to your question, even if you find all the relevant state law.

I understand and will definitely look into the state law issues. But from a IRC perspective, would paying those fees out of plan expenses violate Code Section 401(a)?

[QDROphile]

Even though ERISA does not apply, I agree with your thought that the Code should not be be offended if government plans pay expenses from plan assets in a similar way as private sector plans. I don't think ERISA holds the Code in check despite some diffrences between the COde and ERISA in certain matters.

[Everett Moreland]

From Form 14035, Pilot Questionnaire for Governmental Plans Initative (February 2009) (available at http://www.irs.gov/pub/irs-pdf/f14035.pdf):

"Under the Code, the exclusive benefit rule requires that, except for the payment of plan expenses, plan assets must be used for the exclusive benefit of participants."

[Randy Watson]

From Form 14035, Pilot Questionnaire for Governmental Plans Initative (February 2009) (available at http://www.irs.gov/pub/irs-pdf/f14035.pdf):

"Under the Code, the exclusive benefit rule requires that, except for the payment of plan expenses, plan assets must be used for the exclusive benefit of participants."

Excellent. Thanks.