Advisory Committee on Tax Exempt and Government Entities (ACT ...

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PROTECTING PLAN BENEFITS:IMPROVING GOVERNMENTAL DEFINED CONTRIBUTION PLAN COMPLIANCEIRA/KEO $1.06T $4.22T 298%Federal ThriftPlan $0.06T $0.17T 183%DC Subtotal $2.52T $8.52T 238%Total Ret.Assets $5.88T $16.22T 176%DC % of RetAssets 42.9% 52.5% NA*Does not include non-457(b) state and local defined contribution plan assets*Inclusive of non-governmental 403(b) and 457(b) plans *Excludes governmental 401(a) and 401(k) data The following provides a snapshot of the governmental defined benefit plan market.Defined Benefit Statistics 12Assets(000,000) ParticipantsState & Local DefinedBenefit $3,150,000 18,484,000Federal Defined Benefit $1,100,000 12,428,000Total Governmental DB $4,250,000 30,912,000Categories of Governmental Defined Contribution PlansThe following is a brief description of categories of governmental defined contributionplans457(b) – IRC section 457(b) deferred compensation plans are available to employees ofgovernment agencies as well as to any tax-exempt 501(c) organization including privatefoundations and endowments. As of 2005, 31,450 state and local governmentalemployers were offering such plans 13 . Public sector 457 (b) plans are typically offeredas a supplement to existing defined benefit systems. Favorable regulatory changesincluding EGTRRA have improved the features of these plans leading to an increase inadoptions as well as increased participation. With respect to regulatory oversight, it isnoteworthy that the IRS TE/GE Division has audit jurisdiction over 457(b) plans, whileIRS Counsel maintains jurisdiction with respect to rulings.The following are relevant data:• Assets held in 457(b) plans totaled $144 billion in 2005 and are estimated tohave totaled $183 billion at the end of 2007 1412 EBRI Databook on Employee Benefits, Employee Benefit Research Institute, February 200613 Trends in Public Sector Retirement Plans, Nationwide Retirement Education Institute, Volume II, March 200614 Non-Profit Sector DC Plans, Public Elementary/Secondary School Systems, Spectrem Group, 2008ADVISORY COMMITTEE ON TAX EXEMPT AND GOVERNMENT ENTITIES (ACT) June 11, 2008 8
PROTECTING PLAN BENEFITS:IMPROVING GOVERNMENTAL DEFINED CONTRIBUTION PLAN COMPLIANCE• Section 457(b) plans are expected to experience the highest growth rate of anycategory of defined contribution plan between now and 2011 with the exceptionof the Federal Thrift Savings Plan 15• Due to the elimination of the coordination of contribution limits under EGTRRA, asignificant number of educational employers began to add 457(b) plans in 2002• A recent report found that 37% of public sector K-12 employers offered section457(b) plans in addition to 403(b) plans 16403(b) – Section 403(b) plans are available to employees of educational organizationsas well as charitable entities that fall under Internal Revenue Code 501(c) (3).Depending on the employer category, these plans may fall under the EmployeeRetirement Income Security Act (ERISA). Unlike other employer-sponsored definedcontribution plans, 403(b) plans were not required to operate under a written plandocument. This distinction will be eliminated with the scheduled implementation ofnew 403(b) regulations in January 2009. Generally, the new regulations make 403(b)plans more closely resemble their 401(k) counterparts. For higher educationemployees, the 403(b) is typically a primary retirement vehicle, while K-12 employerstypically offer the 403(b) plan as a supplement to an existing defined benefit plan. Thefollowing are relevant data:• K-12 and Higher Ed employees (governmental and non-governmental) accountfor 25% and 50% of total 403(b) participants 17• Over 90% of the nation’s 14,000 public sector K-12 employers offer 403(b) plans 18401(a) – Governmental 401(a) defined contribution plans may be offered by governmententities including States, Tribes or any subdivisions or agencies thereof. These plansmay be offered as a supplement to existing defined benefit plans, as a conduit foremployer contributions to match 457(b) deferrals or, as an alternative or replacement topre-existing defined benefit plans. Reliable statistics for 401(a) defined contributionplans are not available. However, in the National Association of Government DefinedContribution Administrator’s (NADGCA) 2006 Match Plan Profiles report, five (5) statesand one state university reported offering a 401(a) match a plan. The following areadditional data:• 6% of public K-12 employers reported offering 401(a) DC plans 19• In response to NADGCA’s 2007 Defined Contribution Plan Survey, 14% of surveyed employers reported offering 401(a) defined contribution plans 15 State of the 403(b) and 457 Marketplace, Challenges and Opportunities, Cerruli Associates, 200716 Non-Profit Sector DC Plans, Public Elementary/Secondary School Systems, Spectrem Group, 200817 Non-Profit Sector DC Plans, Public Elementary/Secondary School Systems, Spectrem Group, 200818 State of the 403(b) and 457 Marketplace, Challenges and Opportunities, Cerruli Associates, 200719 State of the 403(b) and 457 Marketplace, Challenges and Opportunities, Cerruli Associates, 2007ADVISORY COMMITTEE ON TAX EXEMPT AND GOVERNMENT ENTITIES (ACT) June 11, 2008 9
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EXHIBIT DSubmission Type:(insert fr
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EXHIBIT D (CONTINUED)18. Descriptio
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EXHIBIT D (CONTINUED)VCP CHECKLISTT
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IRC, 2007-CODE-VOL, SEC. 280F. LIMI
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PENIRC S 274 Page 1 of 12IIRC, 2007
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Withholding RequirementsACCOUNTING
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