Pre-ERISA 401(a)(4)

[Guest KDGCRK]

IRC section 411(e) requires governmental plans to satisfy the vesting requirements of pre-ERISA 401(a)(4)(4) and 401(a)(7). Pre-ERISA 401(a)(4) imposes non-discrimination requirements (which are substantially similar to current 401(a)(4)). As applied in the context of vesting, pre-ERISA 401(a)(4) would require that the vesting provided in the plan does not favor the highly compensated. In the case of the plan we work with, all participants are fully vested upon admission to the plan (a local government, DC Plan). Although the plan covers only the highly compensated (in the pre-ERISA sense), our interpretation of Section 411(e) and pre-ERISA 401(a)(4) is that out structure does not violate pre-ERISA 401(a)(4) because they are no non-highly compensated and all participants are 100% vested at all times.

Does anyone know whether this is the correct application of pre-ERISA 401(a)(4) to government plans? To apply pre-ERISA 401(a)(4) to anything beyond vesting would result in IRC Section 411(e) imposing pre-ERISA non-discrimination requirements generally. This does not seem consistent with the fact that local government plans are not subject to the discrimination requirements of the current 401(a)(4).

Any thoughts?

[RTK]

Not much time to respond. Take a look at IRC 401(a)(5)(G) added by Taxpayer Relief Act of 1997 . Basically, nondiscrimination and coverage requirements do not apply to state and local governmental plans.

[Guest KDGCRK]

But doesn't the exemption apply only to the current 401(a)(4)? Is there any authority for the proposition that 401(a)(5)(G) applies to pre-ERISA 401(a)(4)?

[Guest Jose Rosario]

Have you been able to find authority for the proposition that governmental plans are or are not exempt from pre-ERISA 401(a)(4)?