Government plan language

[Belgarath]

I came upon an interesting situation here. Governmental (Indian Tribal) 401(k) Plan is using an FIS VS document. The FIS VS document removes all ERISA items, but DOES NOT remove the IRS requirements normal for private plans. So, even though normal nondiscrimination testing, for example, is not REQUIRED by the IRS, the document requires it. To overcome this, the TPA did an "omnibus" type of amendment that, to paraphrase, says that notwithstanding any other language in the document to the contrary, the requirements of the IRC and regulations from which Governmental plans are exempt, shall not apply to this plan, specifically including but not limited to 401(a)(4), 410(a), 401(b), etc., etc...

Now, this probably works ok, but it would clearly take it out of pre-approved VS status and the corresponding automatic reliance, so they should have applied for a determination letter, right? Or am I missing something?

[Luke Bailey]

Belgarath, I think your analysis is correct, but if that's all they did I'm not sure they are at much risk of having the IRS attempt (or be successful) in disqualifying the plan. Sounds like it would still be compliant as (technically) individually designed.

[John Feldt ERPA CPC QPA]

It may be a better practice to actually remove those provisions manually and to modify the Amendment section of the document so that it does not give authority to amend to a vol sub practitioner, because they really can’t do that in an IDP. However, those manual changes add time and costs. I have also seen attorneys do something very similar for church plans, and receive D Letters.

In any case, if they have not applied for an IRS Determination Letter, I would suggest strongly that they do so.

[Belgarath]

Hi John - sorry I didn't make it clearer - I agree with you -  the  amendment I referred to was in fact signed by the client. I should have said that the TPA prepared the amendment for the client to sign. I haven't delved into the details yet, but after a cursory glance I have a feeling that this blanket override of all non-required provisions isn't accurate in terms of the actual plan operation...

[John Feldt ERPA CPC QPA]

No, I was unclear. I am saying to look at the plan document's section regarding how it can be amended (Article VIII (8)? in the BDP). See if it still allows the document practitioner to execute amendments on behalf of the employer - that's what I was talking about.

[Belgarath]

It does, but that right isn't unlimited. Anyway, I'm not going to spend much time on this until (or if) they engage our services! Thanks for the response.