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Pay-to-Play queestion---SIMPLES and SEPS

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Can anyone advise on the application of the SEC Pay-to-Play rule (Rule 204(4)-5) to SIMPLES and SEPS? I have been told that it is possible for a government entity, as defined in the Rule, to adopt a SIMPLE or SEP. Anyone agree that this is correct?

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I should add, that I do believe according to IRS Notice 98-4 that the answer is "yes" as to SIMPLE plans. I'm having trouble however, verifying the answer as to SEPs.

Q. B-4: Are tax-exempt employers and governmental entities permitted to maintain SIMPLE IRA Plans?

A. B-4: Yes. Excludable contributions may be made to the SIMPLE IRA of employees of tax-exempt employers and governmental entities on the same basis as contributions may be made to employees of other eligible employers.

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It seems at least possible for a governmental employer to maintain a SEP with contributions other than salary-reduction contributions. If you need or want the details, check with the top expert, Gary Lesser, or buy his SIMPLE, SEP, and SARSEP Answer Book (which also advertises in BenefitsLink).

And in thinking about rules against pay-to-play, don't limit your vision to the Federal Investment Advisers Act rule. The IAA does not supersede or preempt State and local laws that regulate lobbying and political activity (rather than conduct as an investment adviser). Almost all States, many municipalities, and some retirement plans have State and local laws that impose consequences on political contributions that, directly or indirectly, could benefit those who could influence a retirement plan's selection of a service provider.

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania



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