1 IRS Education, Outreach and Compliance Efforts for the Governmental Plans Community Association of County Retirement System Administrators November 11, 2008

2 Andrew Zuckerman Director, Employee Plans – Rulings and Agreements (202)

3 IRS Governmental Plan Initiative On April 22, 2008, the IRS held a Governmental Plan Roundtable in DC. On April 22, 2008, the IRS held a Governmental Plan Roundtable in DC. Representatives from over 40 governmental plans attended. Representatives from over 40 governmental plans attended. The Roundtable was the first step of an initiative by Employee Plans to open a dialogue with the governmental plan community. The Roundtable was the first step of an initiative by Employee Plans to open a dialogue with the governmental plan community.

4 IRS Governmental Plan Initiative Presentations specifically geared toward governmental plans were made by representatives of Presentations specifically geared toward governmental plans were made by representatives of EP Determinations EP Determinations TEGE Counsel TEGE Counsel EP Examination EP Examination Voluntary Compliance Voluntary Compliance Federal, State and Local Governments Federal, State and Local Governments Copies of these presentations are available at Copies of these presentations are available at then click on the link to the Governmental Plans webpage. then click on the link to the Governmental Plans webpage.

5 EP – Rulings and Agreements Compliance Programs Determination Letter Program – Rev. Proc Determination Letter Program – Rev. Proc Employee Plans Compliance Resolution System (EPCRS) – Rev. Proc Employee Plans Compliance Resolution System (EPCRS) – Rev. Proc

6 Why get a Determination Letter? It lets the plan sponsor know that the plan provisions meet the requirements of the law. Once the IRS approves a plan, the plan sponsor can rely on the determination letter even if a defective provision is later discovered in the plan. Filing a timely request for a determination letter provides the plan sponsor additional time to correct improper plan provisions. Self-correction of significant operational failures requires a current determination letter.

7 Determination Letter Program – Cycle C The current filing cycle for governmental plans to request a determination letter opened on February 1, 2008 and closes on January 31, The current filing cycle for governmental plans to request a determination letter opened on February 1, 2008 and closes on January 31, Filing after the end of Cycle C would require the governmental plan to file off-cycle and lose its priority review status. Filing after the end of Cycle C would require the governmental plan to file off-cycle and lose its priority review status. Off-cycle filings are not reviewed until completion of all on-cycle cases. Off-cycle filings are not reviewed until completion of all on-cycle cases.

8 Change In Filing Cycle – Cycle C or E On November 5, 2008, a special edition of the Employees Plans newsletter announced that governmental plans can now choose to file in Cycle E. On November 5, 2008, a special edition of the Employees Plans newsletter announced that governmental plans can now choose to file in Cycle E. No election is required – just file in Cycle E. No election is required – just file in Cycle E. If you have already filed, you can withdraw the application and get a refund of the user fee. If you have already filed, you can withdraw the application and get a refund of the user fee. If you file in Cycle E – you need to amend for the Cycle E Cumulative List and make all required interim amendments for Cycle C and D. If you file in Cycle E – you need to amend for the Cycle E Cumulative List and make all required interim amendments for Cycle C and D.

9 Remaining in Cycle C You can choose to remain in Cycle C and file a determination letter application by January 31, You can choose to remain in Cycle C and file a determination letter application by January 31, Incentives to remain in Cycle C- Incentives to remain in Cycle C- Move to the top of the DL queue. Move to the top of the DL queue. One-half reduction in VCP user fee for all qualification failures One-half reduction in VCP user fee for all qualification failures Moved to the top of the VCP queue Moved to the top of the VCP queue One-half reduction in sanction for non-amender failures discovered during review of determination letter application One-half reduction in sanction for non-amender failures discovered during review of determination letter application

10 EPCRS Set forth in Revenue Procedure Allows plan sponsors to correct disqualifying plan provisions through self-correction, by filing an application (with a fee) to the IRS, or through correction on examination. Information about EPCRS can be found at - click on the link “Correcting Plan Errors.”

11 Common Failures for Governmental Plans Failure to timely amend the plan for changes in the law. Failure to timely amend the plan for changes in the law. Failure to make minimum distributions. Failure to make minimum distributions. Failure to limit compensation in accordance with IRC section 401(a)(17). Failure to limit compensation in accordance with IRC section 401(a)(17). Failure to limit benefits in accordance with IRC section 415. Failure to limit benefits in accordance with IRC section 415. Allowing ineligible employees to participate in the plan. Allowing ineligible employees to participate in the plan.

12 Issues raised by the Governmental Plan Community A number of issues were raised by the various representatives of governmental plans. A number of issues were raised by the various representatives of governmental plans. Some were specific to the IRS determination letter process. Some were specific to the IRS determination letter process. Others dealt with general issues related to state laws. Others dealt with general issues related to state laws. Finally, a series of questions were submitted to the IRS. Finally, a series of questions were submitted to the IRS.

13 Single Plan Document We recognize that a governmental plan may not have a cohesive single plan document. We recognize that a governmental plan may not have a cohesive single plan document. We’re willing to work with the governmental plan community if a single plan document cannot be submitted. We’re willing to work with the governmental plan community if a single plan document cannot be submitted. We only request that the various documents be organized in a manner where we can identify the plan provisions to show the plan is qualified. We only request that the various documents be organized in a manner where we can identify the plan provisions to show the plan is qualified. A “working copy” of a plan document would be acceptable. A “working copy” of a plan document would be acceptable.

14 Extension of the Remedial Amendment Period During the determination letter process, IRS may require amendments to the plan. During the determination letter process, IRS may require amendments to the plan. Those amendments must be adopted by the 91 st day following issuance of the determination letter. Those amendments must be adopted by the 91 st day following issuance of the determination letter. A number of governmental plans cannot meet this date because the legislative body that needs to adopt the amendment(s) will not be in session. A number of governmental plans cannot meet this date because the legislative body that needs to adopt the amendment(s) will not be in session.

15 Extension of the Remedial Amendment Period The Service has the authority to extend the remedial amendment period. The Service has the authority to extend the remedial amendment period. We are working on guidance addressing this issue which should fix the problem. We are working on guidance addressing this issue which should fix the problem.

16 Governmental Plans without GUST Determination Letters Failure to timely amend a plan would result in a disqualifying defect. Failure to timely amend a plan would result in a disqualifying defect. The Service reviews prior plan documentation before issuing a current determination letter. The Service reviews prior plan documentation before issuing a current determination letter. Governmental Plans that have not received a GUST determination letter will be required to provide proof of compliance with GUST. Governmental Plans that have not received a GUST determination letter will be required to provide proof of compliance with GUST.

17 Redlined Documents A redlined version of the plan document will no longer be required. A redlined version of the plan document will no longer be required.

18 Annual Determination Letter Submissions State legislatures could pass interim and discretionary plan amendments each year. State legislatures could pass interim and discretionary plan amendments each year. While plans are required to timely amend for all interim and discretionary amendments, those amendments only need to be submitted during the plan’s filing cycle (Cycle C for governmental plans). While plans are required to timely amend for all interim and discretionary amendments, those amendments only need to be submitted during the plan’s filing cycle (Cycle C for governmental plans).

19 Customer Outreach and Education Dialogue with you to raise awareness. Dialogue with you to raise awareness. Governmental Plans Webpage – Governmental Plans Webpage – Dedicated for governmental plan questions - Dedicated for governmental plan questions - Newsletters. Newsletters.