Section 401(a) Plan for Municipal Authority

[Guest CVCalhoun]

Yep, a 401(a) plan is definitely a viable option. Basically, a 401(a) plan is the normal type of retirement plan that a private employer would have, except that the rules are greatly simplified for governmental plans. (You can click here for a complete list of which private plan rules do and do not apply to governmental plans.

A 401(a) plan does not give employees the option to put in more pretax money than they could with the 457 plan alone. However, if the employer wants to do matching contributions, or add an employer-paid benefit, the 401(a) plan allows a lot more flexibility.

[Guest John Compton]

Hi -

Could anyone tell me whether a Section 401(a) plan would be a viable option for a municipal authority? Also, would it be possible to use such a plan in conjunction with a Section 457 plan?

This has been suggested to us as a possible plan - I have never heard of a 401(a) plan before, especially as they may relate to a governmental concern.

Any assistnace you can provide us with would be very much so appreciated.

Thanks!!!

[jsample]

When a municipal authority does set-up and maintain a 401(a) plan, does their plan document need to be updated for law changes and restated every restatement period just like a qualified plan?

I am a tpa in Pennsylvania.  We provide services for defined contribution plans to a dozen small municipalities and authorities.  These entities maintain their own plans, they are not part of the PA Municipal Retirement System.  These plans do not file 5500's, they complete PA Act 205 every other year.  We have always maintained their documents and followed the amendment requirements for qualified plans.  Recently we have been asked to take over the administration for some PA municipalities.  These municipalities did their own administration for 20 years.  Due to recent retirement of the people who ran their plans, the new supervisor does not want to do these tasks.  I am finding plan documents on vendor prototypes that haven't been updated since 2004.  One municipality was running their plan from one sheet of paper listing their plan provisions.

I have tried to research online and also in The County Commissioners Association of Pennsylvania and the PA Municipal Pension Handbook.  They don't really specify the plan document requirements.  I don't know if I can simply update these outdated documents and move forward or if they need to enter some sort of a correction program.  I am leaning towards no program, as they aren't even on the DOL or IRS radar as qualified plans.

As a side note - I wonder where this will appear, resurrecting a thread from 1998!

Thank you.