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

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PROTECTING PLAN BENEFITS:IMPROVING GOVERNMENTAL DEFINED CONTRIBUTION PLAN COMPLIANCEobjectives. However, experts contacted by the ACT indentified some unmet needs thatthe IRS could address in an economical way. These needs include an absence ofinformation about how to coordinate certain provisions of 401(a), 403(b) and 457(b)plans that may be offered by one employer and confusion over how a governmentalplan sponsor should interpret IRS guidance.Multiple Plan Administration GuideAs stated previously a large number of governmental entities offer multiple categories ofplans. Employers and participants can be confused as to how these plans shouldinteract. The confusion and risk of operational failure is exacerbated where threedifferent government agencies and plan service providers may be responsible foradministering defined benefit, 457(b) and 403(b) plans. The ACT’s recommendation isthat the IRS, develop a publication that sets forth requirements for coordinating theinteraction of certain provisions between plans including contribution limits, purchase ofpermissive service credits, plan loans, rollovers and plan amendments. Additionally, theIRS should coordinate with State retirement plan agencies or industry organizations todistribute such a multiple plan administration guide.Governmental Plan Q & A PublicationTo address the issue of misuse or misinterpretation of guidance designed for corporate401(k) plans, when necessary, the IRS should develop an accompanying Q&A forgovernmental employers to assist them in interpreting sections of the guidance thatapply to their governmental plans.Additional PublicationsPublication 571, which describes provisions for the 403(b) plan, is seen as a useful tool.Given the projected growth rate for 457(b) plans and recent trends in plan formation, theIRS should consider creating a similar document for 457(b) plans. More broadly, thetopic of publications and tools highlights the absence of uniformity in how IRS resourcesare presented to plan sponsors across the governmental and non-governmentalsectors. With the understanding that the IRS is already making progress in this area, theACT would be happy to work with the IRS on how communications, tools andpublications are presented to different segments of the retirement plan market.Build on Initiatives to Partner with Governmental Plan Sponsors and PractitionersThe IRS TE/GE team has already embarked on an initiative to work more effectivelywith the governmental plan community to assist governmental plans in achieving therecompliance objectives. As noted by Commissioner Miller at the April 22, 2008Governmental Plans Roundtable, the IRS is undertaking an effort to obtain more factualinformation about the governmental market so that it can more effectively serve it.Additionally, governmental employers, particularly at the local level, would benefitgreatly by learning more about the IRS service mission and about the rules that governtheir plans. To achieve this objective most effectively, the IRS should take the followingsteps:ADVISORY COMMITTEE ON TAX EXEMPT AND GOVERNMENT ENTITIES (ACT) June 11, 2008 26
PROTECTING PLAN BENEFITS:IMPROVING GOVERNMENTAL DEFINED CONTRIBUTION PLAN COMPLIANCE• Follow through on planned development of a government plans survey• Develop the survey with input from governmental plan stakeholders using anapproach that provides comfort to respondents about how the information thatthey share will be used• Partner with governmental employer organizations which are interested inretirement plan issues and which have State-level affiliates that can be leveragedto educate local employers• Either through direct outreach or through national organizations, partner withlarge State agencies who often run seminars to educate local jurisdictions onretirement plan issuesGovernmental employer organizations and State fiscal agencies are strong andeffective partners, particularly when they perceive an opportunity to advance theinterests of their members and constituents.The ACT will work with the IRS to maximize such partnering opportunities with the beliefthat the approach to compliance that best serves employees involves partnering, mutualeducation and delivery of IRS services that position governmental plans to succeed.IX.ConclusionThanks to favorable legislation, initiatives undertaken by the IRS and other regulatorsand increasingly professional management, governmental employers now offer definedcontribution plans that are better than ever in terms of cost, quality and soundness ofoperations. By building on steps it has already taken to improve service, the IRS canhelp public sector employers take their retirement plans to the next level in terms ofbenefits, compliance and security. The ACT’s recommendations are respectfullysubmitted with the goal of enhancing and protecting the improved defined contributionbenefits now available to governmental employees.ADVISORY COMMITTEE ON TAX EXEMPT AND GOVERNMENT ENTITIES (ACT) June 11, 2008 27
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