IRC 414(d) Governmental instrumentality

[Purplemandinga]

Perhaps this has been discussed here but how would one go about determining whether an entity is a governmental instrumentality or agency? 

For example, lets say several counties joined together to create a nonprofit authority to oversee solid waste removal or establish a nonprofit rural transit authority. What should one look at to determine whether either of these authorities could sponsor a 401(k) or would be stuck using a governmental 401(a) only plan?

[Belgarath]

As far as I know the term "governmental" entity has not been clearly defined by the IRS or in ERISA. The IRS issued proposed regulations, and this was supposedly going to be coordinated with IRS, DOL, and PBGC so there would be consistency, but I'm not aware that they have been finalized.

If you have access to the EOB, Sal has a great discussion of this. In the meantime, this might help.

https://www.federalregister.gov/documents/2011/11/08/2011-28853/determination-of-governmental-plan-status

[Peter Gulia]

For more information, Wolters Kluwer's Governmental Plans Answer Book.

If a client wants reliance or guidance, call Carol Calhoun at Venable.

 

[Susan L.]

In the meantime (as we wait for guidance), there's Rev. Rul. 89-49, 1989-1 C.B. 117, which is summarized in one publication as follows: Factors to be considered include the degree of control the federal or state government has over the organization’s everyday operations, whether there is specific legislation creating the organization, the source of funds for the organization, the manner in which the organization’s operating officials are selected, and whether the governmental unit involved considers the organization’s employees to be its own employees. A plan is not considered a governmental plan merely because the sponsoring organization has a relationship with a governmental unit or some quasi-governmental power.