Group Trust Rules Modified

Revenue Ruling 2011-1 revises the general rules for group trusts and provides model language for the changes. It also extends transition relief under Revenue Ruling 2008-40 for Puerto Rico IRC Section 1165 qualified plans to January 1, 2012.

This revenue ruling allows assets of:

  • IRC Section 403(b)(7) custodial accounts,
  • IRC Section 403(b)(9) retirement income accounts, and
  • IRC Section 401(a)(24) governmental plans

to be pooled together after January 10, 2011, in a group trust with the assets of IRC Sections 401(a) and 457(b) governmental plans, and IRAs without affecting the group trust’s or participating separate group trust retiree benefit plan’s tax status, as long as the group trust meets certain requirements.

Under the ruling, each plan that adopts the group trust must state in its governing documents that it will use the plan’s assets for the exclusive benefit of plan participants and their beneficiaries. A plan that participates in a group trust and that must be amended to include the exclusive benefit requirement of Revenue Ruling 2011-1, may be amended anytime during 2011 to include this requirement, retroactive to the effective date of the ruling (January 10, 2011). This amendment must be consistent with the plan’s operations.