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Qualified Plans

Guest wcasay

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I have seen a few custom government pension plan documents that has included a few ERISA sections. For the most part, they include mainly the correct government sections. If a government plan documents includes a few sections from ERISA does the plan sponsor then need to comply with ERISA totally? If not, can the plan sponsor add certain ERISA sections and still maintain that they are a government plan plan and only venture outside for those other sections selected? Example, one of the ERISA provisions included in the plan is the QDRO language, with reference to the IRC. Assuming that there is no state requirement to follow the QDRO regulations, can they do this without following being required to follow ERISA totally?

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A plan that is not subject to ERISA because the employer is a governmental entity cannot become subject to ERISA merely because its plan document says it is, or because it adopts certain of the provisions that would be required of a nongovernmental employer. However, ERISA-type provisions in a governmental plan may in some instances give rise to contractual rights under applicable state law. Worst case would be to have a state court hold that because a plan stated, for example, that "this plan shall be applied in accordance with ERISA," all of the ERISA rules would apply to the plan under applicable state law.

However, a governmental plan can clearly provide for compliance with domestic relations orders without becoming subject to all of ERISA, assuming that nothing in applicable state or local law or the plan document forbids it from complying. (Indeed, because state laws are not preempted by ERISA in the case of governmental plans, state domestic relations law can in some instances require a governmental plan to comply.) Section 414(p) of the Internal Revenue Code states that if a governmental plan complies with any domestic relations order, regardless of whether that order would be a QDRO if it applied to a nongovernmental plan, the order is treated as if it were a QDRO for tax purposes. It is fairly common for state laws or plan documents to incorporate the IRC QDRO provisions by reference for this purpose.

One caution on all this is that although a governmental plan is permitted by the IRC to comply with any domestic relations order, some orders issued by a domestic relations court may not constitute domestic relations orders under the IRC. This is a particular issue if the order is issued by a foreign court (i.e., not a "state"), or if the order is in favor of a former domestic partner who is not a "dependent" within the meaning of IRC section 152.

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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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