Govermental agency/instrumentality vs. tax exempt org.

[Guest xplan]

If a tax exempt employer is funded by various Federal, State and local government grants, would they be considered an instrumentality of the government? They provide employment training for a county in PA.

The reason I ask, is that they are currently sponsoring a 401k plan, but I am lead to believe that they may not be an eligible employer. How is a government agency or instrumentality defined? Does anyone know of any additional questions I need to ask in order to properly assess taking over the admin for this employer?

Thanks

[Guest Big Guy]

The primary consideration is the degree of control that the government unit has over the organization's everyday operations according to Revenue Ruling 89-49 1989-1 C.B. 117. Other factors to be considered include:

-whether there is specific legislation creating the organization;

-the source of funds for the organization;

-the manner in which the organization's trustees or operating board are selected;

-whether the applicable governmental unit considers the employees of the organization to be employees of the applicable governmental unit.

Although all of the above factors are considered in determining whether an organization is an agency of a government, the mere satisfaction of one or more, or even all, of the factors is not necessarily determinative. There mere association of a plan sponsor with a governmental unit or agency would not generally establish enough control to make a plan a governmental plan under section 414(d). Good Luck