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Correction for governmental entity

Guest M. Martin

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Guest M. Martin

We are reviewing a take over Money Purchase plan that has an original effective date of 5/01/87 and during several discussions with the client it has been come to our attention that they may be a governmental entity. The potential problems are that the plan was set-up on a standard DC prototype document and has had non-discrimination testing and annual Form 5500’s prepared for several years.

1. For at least the past 12 years their TPA has filed a Form 5500 and prepared testing for the plan. However, from the information that we have gathered, we suspect these requirements may not be applicable.

The client would like to take advantage of the ERISA exemptions offered to governmental agencies (no testing or 5500); however, I am unfamiliar with governmental plans or what the best approach would be to get the client where they need to be. Does the existing plan need to be terminated or merged into a new plan so that a final Form 5500 can be filed?

2. The plan was set -up on a Non-standardized Prototype adoption agreement

Is there a larger underlying problem with the plan being on a prototype document not designed for governmental plans? Or is there no problem since operationally the plan has been in compliance with testing and 5500's?

Any guidance as to what type of retirement vehicle might be more appropriate and/or the necessary steps that should be taken to get them there would be greatly appreciated.

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