Rural Cooperatives

[oldman]

Are rural cooperatives, as defined under §501©(12), allowed to sponsor a 401(k) plan? Also, would the plan be maintained as an ERISA plan or a governmental plan?

[PensionPro]

Yes, rural cooperatives may sponsor a 401(k) plan per IRC 401(k)(7). Also see 401(k)(4)(B)(ii). Not sure on your second question. A 401(k) plan sponsored by a rural cooperative does not seem to meet the definition of governmental plan under 414(d).

[oldman]

Thanks for confirming ability of rural cooperatives to sponsor a 401(k). 401(k)(4)(B)(ii) provides that governmental entities are ineligible to sponsor 401(k) plans except for rural cooperatives. Does this mean a 401(k) plan sponsored by a rural cooperative would be considered a governmental plan exempt from ERISA? In addition, it is my understanding a rural cooperative's 401(k) plan not only can but must be a money purchase pension plan if the rural cooperative does not have a grandfathered 401(k) plan. Although most employers can have a 401(k) arrangement as part of a P/S or stock bonus plan, a rural cooperativecan only have one in the context of a money purchase pension plan. That being said, following the establishment of the pension plan, and the addition of the 401(k) feature, can the employer change the money purchase plan featuere to a profit sharing arrangement, or will that jeopardize the rural cooperative's sponsorship of the 401(k) plan?

[PensionPro]

A rural cooperative's 401(k) plan MUST be a DC pension plan per IRC 401(k)(7) such as a MPPP and I don't believe the plan can be amended to a non-pension plan.