Governmental Entity - Head Start Programs

[Guest questions]

I am trying to determine if a 501©(3) entity can be classifed as having a governmental or an angency therefore 403(B) plan. I would greatly appreciate any help to this matter.

I have read Revenue Ruling 57-128, 1957-1 and understand there are 6 points to consider. However, I am still left with the unknown of how/who determines if a company is classified as a "governmental entity".

Are the Head Start programs considered governmental? They are heavily funded by the government. The purpose it performs can fall under a governmental function. There aren't any private interests.

Should Form 5500 be filed? If you file Form 5500 and one has never been filed, wouldn't that be a flag for the DOL?

[Ellie Lowder]

As a 501©(3) organization, you are eligible to establish a 403(B) plan in your own right. With an elective deferral-only 403(B) plan, you would not be an ERISA plan (and have no need to file the form 5500) if you are following the ERISA exemption requirements contained in DOL Reg. 2510.3-2 (limited involvement, etc.). If you are making employer contributions, then you are an ERISA plan - the 5500 will be one of the obligations - however, reporting on that form is very abbreviated for a 403(B) plan.

There are sometimes 501©(3) orgs. that are also governmental organizations (usually district/county hospitals that have also received the 501©(3)designation) - those orgs. are exempt from any Title I, ERISA requirements.

[Guest questions]

What if you are unsure if the 501©(3) entity is classified as an agency of the government?

Who determines the classification?

Yes, the Form 5500 is simplified for 403(B) plans, however, what if you unsure if one needs to be filed? I am working on a take over plan, which is a "head start program", they are unable to produce old copies of the Form 5500. This does not necessarily mean they have never filed one, nor does it mean they don't need to file. My concern is, should one be filed or continue to assume one isn't necessary?

[mbozek]

q: U need to consult a tax advisor on your question. nonprofit 501©(3)s are incorporated under state law and incorporation is filed with sec of state and np may be required to file IRS 990 form if their revenue exceeds a certain amount ($25,000?). Agencies and instrumentalities of govts are usually created under state law or local laws and are sometimes incorporated as a public benefit corporation.They usually do not file a 990 since they do not accept charitable contributions from the public although some get c3 designation. There are some hybred orgs that have characteristics of both private and public entities. Some private ©(3)s get all of their funding from st gov yet they are not govt entities and plans are subject to ERISA. I once had a private c3 client whose employees were participants in a st gov retirement plan- I advised the client that there was no 5500 filing required because the employer did not maintain the plan.

If in doubt why not file a 5500? it is a no brainer for a 403(B) plan. Its cheper than hiring counsel.