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

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PROTECTING PLAN BENEFITS:IMPROVING GOVERNMENTAL DEFINED CONTRIBUTION PLAN COMPLIANCEand to establish a dialogue with governmental plan advocates. These outreach activitiesalso confirmed support for a pre-approved plan program for governmental plans.Outreach to Plan Sponsors, Consultants, Service ProvidersThe ACT reached out to a number of experts to obtain input on both the idea ofrecommending the IRS establish a Pre-Approved Plan Program (sometimes referred toas a “prototype system”) for governmental defined contribution plans and the questionof what other actions the IRS might take to assist governmental defined contributionplans’ compliance efforts.These outreach activities included the following:• Conference call with members of the NAGDCA industry group on March 18, 2008,which included representatives from Fidelity, Great West, ING, ICMA, NationwideRetirement Solutions, Prudential and TIAA – CREF• Outreach to several leading governmental defined contribution plan executives withoversightresponsibility for State Plans in Maryland, New York and Ohio• Solicitation of input from leading governmental plan consultants, Willett Consultingand Segal Advisors• Review of positions pertaining to 403(b) Regulations submitted by the Society ofProfessional Asset Managers and Recordkeepers (SPARK) Institute and by FidelityInvestments• Review of written comments developed for ACT by Willet ConsultingThe following themes emerged from these outreach activities:• Support for the idea of a Pre-Approved Plan Program for governmental employers• Need for the IRS to develop more governmental plan-oriented communications• Need for communications to assist employers in administering multiple categories ofplans• Low level of awareness of IRS requirements and programs among small employers• Concerns about employers’ preparedness for the new 403(b) regulationsAggregated Data from Industry Publications, Reports and Statistical analysesIn an effort to discern governmental market characteristics and trends the ACTconsulted a number of analyses. These analyses included: The Cerulli Report, State ofthe 403(b) and 457 Marketplace: Challenges and Opportunities; NADGCA’s DefinedContribution Plan Survey and Match Plan report; Trends in Public Sector RetirementADVISORY COMMITTEE ON TAX EXEMPT AND GOVERNMENT ENTITIES (ACT) June 11, 2008 14
PROTECTING PLAN BENEFITS:IMPROVING GOVERNMENTAL DEFINED CONTRIBUTION PLAN COMPLIANCEPlans published by the Nationwide Retirement Education Institute and; State and LocalPension Plans, Center Retirement Research at Boston College.Themes emerging from the statistical analyses included the continued prominence ofdefined benefit plans, growth in the section 457(b) market, governmental employersoperating multiple categories of plans and the expectation that educational employerswill face significant challenges in preparing for the new 403(b) regulationsMeetings with IRS Senior ManagementThe ACT solicited comments from the Internal Revenue Service senior managementteam and participated in the Internal Revenue Service-led Government Roundtableprogram held on April 22, 2008. It is noteworthy that the Governmental PlansRoundtable drew representation from representatives of some of the Nation’s largestgovernmental defined contribution and defined benefit plans and was significantlyoversubscribed.General observations and recommendations from these meetings are summarizedbelow:• Absence of statistics on governmental plans due to lack of 5500 filing requirements• IRS acknowledgment that the governmental plan community has been underserved• IRS plans for stepped up audit and examination activity• Encouragement for governmental 401(a) plans to use EPCRS to self-correctcompliance errors• The IRS’s initiatives aimed at partnering with the governmental plans to help themsucceed• Plans to develop a survey of governmental plans to learn more about public sectorchallenges• Employers’ concerns about reconciling IRS regulations to State constitutionalprotections and legislative processes; concerns about unintended consequencesof information sharingV. IRS Programs, Products and ServicesThe Internal Revenue Code applies a complex set of rules to ensure that employers andemployees covered by retirement plans enjoy the benefits offered by these plans.These rules are implemented through a series of regulations, rulings and other IRSguidance. The Code requirements include rules regarding (i) eligibility to participate,(ii) vesting of benefits, (iii) accrual of benefits or allocation of employer and employeecontributions, (iv) prohibitions on discrimination in favor of highly-compensatedemployees, (v) distribution of benefits, (vi) use of plan assets for the exclusive benefit ofADVISORY COMMITTEE ON TAX EXEMPT AND GOVERNMENT ENTITIES (ACT) June 11, 2008 15
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