Indian Tribes

[Fisher]

Can an Indian Tribe set up a 457(b) plan as a Governmental organization since PPA

[Peter Gulia]

The available information on this question is discussed in chapters 2 and 14 in 457 Answer Book (WoltersKluwer).

[Fisher]

The available information on this question is discussed in chapters 2 and 14 in 457 Answer Book (WoltersKluwer).

I looked at that ,and it is basically unclear. I was wondering if anyone has seen anything else related to them being eligible or not for a 457(b)

[Peter Gulia]

Carol Calhoun's explanantion in chapter 14 about whether a Native American Indian tribe might or might not be a State government employer within IRC 457(e)(1)(A) describes some uncertainties because the law that Congress made is ambiguous or uncertain. Carol is one of a very small handful of governmental-plans experts; so if there were a published ruling, she'd likely know about it and write about it.

Perhaps your client is a candidate for seeking an IRS ruling?

[mbozek]

The available information on this question is discussed in chapters 2 and 14 in 457 Answer Book (WoltersKluwer).

I looked at that ,and it is basically unclear. I was wondering if anyone has seen anything else related to them being eligible or not for a 457(b)

Indian tribes will be eligible to establish a 457b plan only if it meets the requirements for a tax exempt organization or are a state or political subdivison or agency or instrumentality of a state . Indian tribes are regarded as foreign nations under federal law under the supervision and care of the federal government and are exempt from state laws.

[Fisher]

Carol Calhoun's explanantion in chapter 14 about whether a Native American Indian tribe might or might not be a State government employer within IRC 457(e)(1)(A) describes some uncertainties because the law that Congress made is ambiguous or uncertain. Carol is one of a very small handful of governmental-plans experts; so if there were a published ruling, she'd likely know about it and write about it.

Perhaps your client is a candidate for seeking an IRS ruling?

Thanks FGC -I agree with you about Carol's expertise. I was hoping something may have come up recently for which she might respond.

[mbozek]

Carol Calhoun's explanantion in chapter 14 about whether a Native American Indian tribe might or might not be a State government employer within IRC 457(e)(1)(A) describes some uncertainties because the law that Congress made is ambiguous or uncertain. Carol is one of a very small handful of governmental-plans experts; so if there were a published ruling, she'd likely know about it and write about it.

Perhaps your client is a candidate for seeking an IRS ruling?

Thanks FGC -I agree with you about Carol's expertise. I was hoping something may have come up recently for which she might respond.

The IRS cannot issue a ruling to extend a statute beyond its legislative boundaries to designate an indian tribe as a state instrumentality under 457. Retirement programs can be extended to otherwise ineligible entities by legislation. A few years ago Congress legislated that the Armed Forces Medical Institute was eligible to sponsor a 403b annuity plan even though its is not a 501c3 or public school. There is also a legislated exception which grandfathered indian tribes which had established 403b plans for tribal schools prior to 1995. See Small Business Jobs Protection Act of 1996 Section 1450(b). The IRS acknowledged a few years ago that it had mistakenly issued rulings and instructions that allowed federal credit unions to establish 457b plans for many years even though they were ineligible because they are federal instrumentalities. The IRS was supposed to come up with a fix but I dont know what was done.

[Lame Duck]

Is there anything new on this as I have a tribal government that wishes to establish a 457 plan?

[Carol V. Calhoun]

PPA provided some guidance, since amplified by Advance Notice of Proposed Rulemaking REG-133223-08, as to when an Indian tribal government would be considered "governmental," but still did not provide any basis for treating it as a "state or local government." Certain tribal governments have, in the past, maintained Section 457(b) plans for their employees, on the theory that they should be considered state or local governments. However, as far as I can make out, none of them have sought an IRS ruling. The only instance in which an instrumentality of an Indian tribal government can clearly have a 457(b) plan is if it is also an organization exempt from tax under one of the provisions of section 501© (e.g., a school or hospital exempt under section 501©(3)).

However, remember that section 457(b) is primarily a limitation, not an enhancement, on the deferred compensation that an organization can provide. An Indian tribal government, unlike a state or local government, can have a 401(k) plan. And an arm or instrumentality of Indian tribal government that qualified as "governmental" (and thus exempt from ERISA's funding standards) could always provide an unfunded deferred compensation arrangement for any or all of its employees, without being bound by the limitations of section 457(b). Even an instrumentality that was considered "commercial" could have an unfunded deferred compensation arrangement for a select group of management and highly compensated employees that was not bound by the limitations of section 457(b).