Governmental Plans Participating in Group Trusts May Need Amending
Certain Internal Revenue Code Section 401(a)(24) governmental plans may need to be amended to add the exclusive benefit requirement by the earlier of:
- the close of the first regular legislative session of the legislative body with the authority to amend the plan that begins on or after January 1, 2012, or
- January 1, 2015 (Notice 2012-6).
This deadline applies to Section 401(a)(24) governmental plans:
- for which the authority to amend the plan is held by a legislative body that meets in legislative session, and
- whose assets are pooled with other group trust retiree benefit plans in a group trust established under Revenue Ruling 81-100, 1981-1 C.B. 326, by meeting the requirements of Revenue Ruling 2011-1.
Exclusive benefit requirement
Revenue Ruling 2011-1 requires each group trust retiree benefit plan that adopts the group trust to expressly state in its governing document that no part of the corpus or income of the group trust retiree benefit plan would be used for, or diverted to, purposes other than for the exclusive benefit of the plan participants and their beneficiaries.
When amendment required
A Section 401(a)(24) governmental plan doesn’t need to be amended if it is already subject to the exclusive benefit requirement under a statute or other rule under state law.
The IRS recognizes that governmental plans may not have a single, cohesive plan document. For example, the IRS allows sponsors of governmental plans applying for determination letters to submit:
- portions of a statute that apply to the governmental plan containing general plan provisions, and
- other documents binding on the plan that contain additional plan language (for example, provisions of regulations, ordinances and other state rules or policies applicable to the plan under state law). See FAQs: governmental plan determination letters for additional information.
The IRS will apply the same rule to determine whether the governing document of a Section