Reporting and Disclosure Requirements

[Guest Jeannie Hagan]

Since governmental plans are exempt from the 5500 series reporting, exactly what are the reporting requirements to the IRS and DOL and the Disclosure to Participants and Beneficiary rules. Are the reporting requirements different for plans that have been qualified vs. plans that have not sought qualification? We are often asked in RFP's about what documents we file for compliance with federal laws for the state and federal government. This seems to be more of a private plan not public plan question.

[Guest CVCalhoun]

The only governmental plans which are subject to Form 5500 reporting are the plans listed in IRC section 6039D(d)(1), as modified by various IRS pronouncements, most notably flexible benefits and premium conversion plans. The only other federally required reporting with respect to governmental plans themselves would be (a) reporting on section 501©(2) or 501©(25) corporations owned by the plan, and (B) reporting on unrelated business taxes, to the extent payable by the plan. (The question of whether governmental plans are subject to UBIT is a complicated and much disputed one, which I won't get into here.) Federal Disclosure to Participants and Beneficiaries rules do not apply to governmental plans.

The two points to watch out for in the case of a governmental pension plan are (a) what tax reporting is required with respect to distributions (this is often complicated by the presence of after-tax employee contributions in the plan), and (B) what state law requirements may exist. Because governmental plans, not being subject to ERISA preemption, can be regulated by the states, you need to look at individual state laws.

Also, as a matter of prudence, you would probably want to have a plan summary of some kind, even if not a formal SPD. State rules concerning the nonimpairability of contracts are typically much tougher than the ERISA standard, so it is particularly critical that there be no misunderstanding of the terms of the plan.

[Note: This message was edited by CVCalhoun]