ITG FAQ #7 Answer-Are Tribal Council members eligible to participate in a 401(k) Plan sponsored by the Tribe?
In order to participate in a 401(k) Plan, the members of the Plan must be employees. Section 1.401(k)-6 of the Income Tax Regulations defines the term employee with the same meaning as section 1.410(b)-9. That section defines employee, in part, as a common law employee. Therefore, it is possible that Tribal Council members could participate in a 401(k) Plan if the facts in the particular case indicate that they are common law employees.
Tribal Council members are generally elected officials, but may be appointed. Under Revenue Ruling 59-354, the pay they receive for services performed as Council members does not constitute wages for purposes of FICA, FUTA, or federal income tax withholding, but it is considered income.
Generally, amounts received for services performed as Council members should be reported on Form W-2. The issuance of Form W-2 strongly suggests that there is an employee/employer relationship between the Tribe and the Tribal Council members, and that as a result of that employee/employer relationship, the Tribal Council members could participate in a 401(k) Plan sponsored by the Tribe. However, the ability of a Tribal Council member to participate in a tribally-sponsored 401(k) Plan is highly dependent on the facts and circumstances of the specific situation.