Document question - public instrumentality - using 401(k) doc

[Belgarath]

Suppose you have a public instrumentality that is considered "governmental" and therefore ineligible to sponsor a 401(k) plan.

Is there any reason that they can't use a 401(k) document, but simply not elect any of the 401(k) provisions? In other words, they only elect PS and rollover, and appropriately modify SPD to remove references to deferrals, etc., etc...

Or does the fact that the document is, according to the IRS Advisory letter, a "Profit Sharing Plan with CODA" preclude them from using it?

I can't see any sensible interpretation for the latter, but thought I'd see if anyone had a different opinion?

[Flyboyjohn]

How about using a profit sharing document with some sort of overarching modification to the effect that while the employer intends that the plan will meet the requirements for tax qualification and provisions inconsistent with the plan's exemption from ERISA are null and void?

[Belgarath]

Thanks - in this case, they have already done what I'm asking about, and I'm just trying to determine if it is ok. I believe it is (it is a pre-approved volume submitter PS/401(k) plan, in case anyone cares) but I just wanted to see if folks thought otherwise.

[jpod]

Are they are happy being bound (presumably) contractually to all of the ERISA-required and Code-required provisions in the documents which otherwise wouldn't be applicable?

[Belgarath]

That's a separate question, but presumably they have no problem with it, as that's what they have been doing.

I want to be clear about this - I'm making no judgment on whether their current situation represents a "best" option - merely trying to confirm that their current document is allowable.

[jpod]

I believe they don't have reliance on the opinion letter (I could be wrong about that), but even so they can use those documents.

[Peter Gulia]

Belgarath, consider posting your query on the board for governmental retirement plans to see whether Carol Calhoun has different or further suggestions.

[ETA Consulting LLC]

Just addressing the first question: Regardless of the type of document, a 401(k) provision is still going to be part of a Profit Sharing (or stock bonus) plan. So, if you have a profit sharing only plan, you may easily write to a 401(k) adoption agreement and merely no elect the 401(k) provisions. I write PS only plans to the 401(k) adoption agreements all the time.

As for the other questions, if you intend to use some of the special exemptions allowed for governmental plans with respect to eligibility and 'other stuff', then you must use a document that reflects those exemptions; as they are not in your regular (standardized or non-standardized) adoption agreements.

Good Luck!