Governmental Plans Answer Book, Second Edition and 2013 Supplement (Posted on October 2, 2012 by Carol V. Calhoun)

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Synopsis

A 2013 Supplement to the Second Edition of the Governmental Plans Answer Book has now been published!

Written by a team of practicing experts, preeminent in their fields, Governmental Plans Answer Book takes the reader step-by-step through the various laws that govern such plans. For those practitioners with private plan experience who wish to work with governmental plans, it compares the regulation of the two types of plans.

The authors systematically answer hundreds of questions and provide an invaluable reference for investment advisors, plan administrators, attorneys, actuaries, and accountants. This book will also serve those institutions that promote, market, service, or provide technical support to retirement plans, products, and related services.

Governmental Plans Answer Book has been updated to include:

• New guidance on group trusts
• Updates on state legislation affecting governmental plans
• Expanded material about pension protections
• IRS focus on need for full vesting on normal retirement age as a requirement for qualified status, even for governmental plans
• Issues for governmental plans for which IRS will not issue determination letters
• Common issues in governmental plans that may preclude qualified status
• New Supreme Court case on effect of mistakes in a summary plan description (SPD)
• Guidance on when a 403(b) plan can be treated as terminated, and thus in-service distributions can be made to employees
• New guidance on what is an “unforeseeable emergency” justifying distributions from a 457 plan
• Updates to public pension asset and membership figures

From the Publisher

With 2,300 plans, $3.12 trillion in assets, and 15 million participants….

You have questions about governmental plans. Panel’s Governmental Plans Answer Book has the answers you need:

• More than 1,500 questions on governmental plans asked and answered
• Advice from top experts on the federal and state laws of governmental plans
• Strategies to obtain favorable tax status
• And more!

From Alabama to Wisconsin, find out how to deal with any governmental plan issue.

It’s no secret–when it comes to governmental plans, even the most seasoned pension professionals often find themselves on shaky ground. For good reason. With more than 2,300 state and local government retirement systems in the U.S.–each subject to federal, state and local laws–confusion about the rules and risk of compliance errors abound. But now there’s a resource that puts you on terra firma when dealing with governmental plans: Panel’s new Governmental Plans Answer Book. Prepared by a team of practicing experts–preeminent in their fields–this comprehensive resource takes you step by step through the various laws that govern these plans. The guide makes it easy to understand the unique features of governmental retirement plans, so you can keep your plan in compliance and handle with confidence the myriad administration issues that arise.

At last–governmental plans demystified!

Co-authors Carol Calhoun, Cynthia Moore, and Keith Brainard have gathered in one, highly accessible volume answers to more than 1,500 questions about governmental plans. In clear, plain-English terms, they set forth the federal laws that regulate governmental plans, the various state and local government pension laws that apply, and the compliance issues that go with them. You’ll find specific guidance on all tax-qualified government pension plans including:

• Defined benefit plans
• Defined contribution plans
• 403(b) plans
• 457 plans
• 401(k) plans
• Excess benefit plans
• And more.

Organized the way you work. Using Panel’s successful Question/Answer format, each chapter provides explanations and guidance on a specific set of issues, and provides a complete working overview of the relevant federal law and state constitutional or legal issues. In the federal area, you’ll learn:

• Which pension qualification rules under Section 401(a) and Section 403(b) of the Internal Revenue Code apply to governmental plans, and which do not
• Rules under the Internal Revenue Code and state law that may govern the investments of governmental plans
• What constitutes a governmental plan and how a governmental plan obtains favorable tax status
• How the regulation of governmental plans is similar–yet different–from that of private plans governed by ERISA
• Rules governing social investing and economically targeted investments by governmental plans
• And more.

Find any state’s requirements in an instant.

To help you quickly determine your state’s rules on any particular issue, Governmental Plans Answer Book provides in-depth, state-by-state charts that outline that jurisdiction’s laws. Organized by topic and presented in an easy-access Appendix, these informative charts provide a clear overview of the general principles of state and local law, and illustrate how the rules vary from state to state. There’s an informative chart–35 in all–for nearly every type of issue that is likely to arise during the life cycle of a governmental plan, including:

• Actuarial methods
• Actuarial valuation
• Age and service requirements
• Annual benefit formula for members per year of service
• Annual reports
• Annual statements
• Benefit protections
• Boards of trustees’ powers and characteristics
• Constitutional pension protections
• Contribution rates and funding
• Early requirement benefits
• Final average salary
• Portability: reciprocal agreements and purchases of service credit
• Postretirement COLA provisions
• Summary plan descriptions
• Vesting requirements
• And much more!

About the Authors:

Carol V. Calhoun is an employee benefits attorney and president of Calhoun Law Group, P.C., just outside of Washington, DC. With over 30 years’ employee benefits and tax law experience, most of it in the governmental plans area, she is recognized as an expert on this topic, and has been selected as a charter fellow of the American College of Employee Benefits Counsel. Ms. Calhoun currently represents several state and local retirement systems. A frequent writer and speaker, Ms. Calhoun has written a chapter for the 457 Answer Book (Panel), has given presentations on government plan topics at numerous conferences and professional meetings, and has contributed to various journals and other publications. She is the founder of the Employee Benefits Legal Resource Site.

Cynthia L. Moore is an attorney who specializes in state and local government retirement plan issues. She is former President of the National Association of Public Pension Attorneys. She is former Washington Counsel for the National Council on Teacher Retirement (NCTR), and has served on the Executive Board of NCTR. Her practice includes representing various retirement systems and other governmental plan clients. Ms. Moore also speaks and writes on government plan topics and is the author of the NCTR’s Public Pension Plans: The State Regulatory Framework, a survey text on state teacher retirement systems.

Keith Brainard is the research director for the National Association of State Retirement Administrators. He collects, prepares and distributes to NASRA members news, studies and reports pertinent to public retirement system administration and policy. NASRA members are the directors and administrators of 76 statewide public retirement systems in the United States. Combined, these systems hold assets of $2 trillion in trust to fund pension and other benefits for most state and local government workers in the U.S.

Mr. Brainard is the author of the NASRA white paper, “Myths & Misperceptions of Defined Benefit and Defined Contribution Plans,” and coauthor of a 2004 Pension Research Council working paper, “Profitable Prudence: The Case for Public Defined Benefit Plans,” which describes the economic role of public employee DB plans. Keith also maintains the Public Fund Survey, an online compendium of public pension data sponsored jointly by NASRA and the National Council on Teacher Retirement.

Mr. Brainard previously served as manager of budget & planning for the Arizona State Retirement System and he provided fiscal research and analysis for the Texas and Arizona legislatures. Keith has a master’s degree from the University of Texas-Austin, LBJ School of Public Affairs, and he lives in Georgetown, Texas.

Table of Contents

Chapter 1: Introduction to Governmental Plans
What is a Governmental Plan?
Statutory Definitions
Plans of Native American Tribes
Plans of Quasi-Governmental Entities
Other Special Situations
Importance of Differences Between Governmental Plans and Private Plans
Legal Issues-In General
ERISA Exemptions
Qualification Rule Differences
Section 403(b) Rule Differences
Other Legal Differences

Chapter 2: Structure of State and Local Governmental Plans
General Information About State and Local Governmental Plans
Creating Entity, Governing Law, and Individuals Covered
Entity That Administers the Plans
Assets in State and Local Governmental Retirement Plans Contributions
Comparison of Defined Benefit Plans and Defined Contribution Plans
Portability of Benefits Under Defined Benefit Plans
Benefits Provided by Retirement Systems and Plans
Protections for the Plans and Their Participants
Employer Pickups
Joint and Survivor Annuities
State Vesting Rules

Chapter 3: Identifying the Employer
Reasons for Identifying the Employer
Definitions of Employer
Controlled Group Rules
Independent Contractors
Leased Employees

Chapter 4: Obtaining Favorable Tax Status
Effect of Favorable Tax Status
Types of Favorable Tax Status
Requirements for Qualified Plan Section 401(a) Status In General
Trust Requirement
Created or Organized in the United States Requirement Exclusive Benefit Rule
Permanence Requirement
Contributions by the Employer, the Employees or Both
Pension Plan
Profit Sharing Plan
Vesting
Minimum Required Distributions
Limitations on Compensation Considered, Contributions and Benefits
Exclusive Benefit Rule and Prohibited Transactions
Retiree Medical Benefits
Other Qualification Rules
IRS Determination Letters
Requirements for Qualified Plan Section 403(a) Status
Requirements for Tax-Deferred Annuity or Custodial Account Section 403(b) Status
Requirements for Section 457(b) Status
Requirements for Excess Benefit Plan Section 415(m) Status Pretax Employee Contributions
IRS Audit Activity
Correction Procedures

Chapter 5: Reporting
Purpose of Reporting by State and Local Governmental Plans Annual Statement of Member’s Account
Other Ways in Which Retirement Systems Communicate with Plan Participants
Summary Plan Descriptions
Annual Reports
Open Meetings Laws
Open Records Laws

Chapter 6: Governmental Plan Funding
Federal Rules In General
Qualified 401(a) Defined Benefit Plans
Qualified 401(a) Defined Contribution Plans
Qualified 401(a) Combination Defined Benefit and Defined Contribution Plans
Qualified 403(a) Fully Insured Plans
403(b) Arrangements
457(b) Plans
Excess Benefit 415(m) Plans
Typical State Rules
Qualified 401(a) Defined Benefit Plans
Qualified 401(a) Defined Contribution Plans
Qualified 403(a) Fully Insured Plans and 403(b) Annuity Arrangements 403(b)(7) Custodial Accounts
457(b) Plans
Excess Benefit 415(m) Plans

Chapter 7: Investment of Plan Assets
Federal Fiduciary Requirements
In General
401(a)(Qualified) Plans
403(b) Plans
457(b) Plans
415(m)(Excess Benefit) Plans
State Fiduciary Requirements In General
Constitutional Requirements
State Statutes Creating Statewide Plans or Providing for the Creating of Local Plans
General State Fiduciary Statutes
Common-Law Fiduciary Requirements
Federal Prohibited Transaction Rules
401(a)(Qualified) Plans
403(b) Plans
457(b) Plans
415(m) (Excess Benefit) Plans
State Prohibited Transaction Rules
Uniform Management of Public Employee Retirement Systems Act and Uniform Prudent Investor Act
Legal List Statutes
Social Investing
State Conflict of Interest Statutes and State Codes of Ethics
Wholly Owned Investments and Investments in Non-Publicly Traded Equity Securities
Unrelated Business Income Tax Issues

Chapter 8: Selecting a Service Provider
State Law Issues
ERISA Analogies
Practical Steps for Meeting Fiduciary Duties in Choosing a Service Provider
Breaches of Fiduciary Duty in Selecting a Service Provider
Modification of Procedures for Selecting a Service Provider
Fiduciary Duties After a Service Provider is Selected
Summary

Chapter 9: Remedies for Fiduciary Breach
Criminal Penalties
Civil Remedies
In General
Common-Law Rules
Statutory Rules
Avoiding Fiduciary Liability
In General
Sovereign book
Statutory Defenses
Insurance

Chapter 10: Participation
Federal Participation Rules
In General
Universal Availability Rule for 403(b) Plans
Social Security and Medicare Tax Exclusions
State Participation Rules
In General
Louisiana State Employees’ Retirement System
Teachers’ Retirement System of Montana
South Carolina Retirement System-Police Officer’s Plan

Chapter 11: Distributions
Common Forms of Distribution
Federal Restrictions on Distribution
Early Distributions
Minimum Distributions
Definition of Retirement
Phased Retirement
Change of Employer
Reemployment
Taxation of Distributions
Retirement Benefits
Nonretirement Benefits
Rollovers and Plan-to-Plan Transfers
Withholding on Distributions
Reporting of Distributions

Chapter 12: Beneficiary Designations
Making a Beneficiary Designation
Using Trusts
Family Rights That Restrain a Beneficiary Designation Charitable Gifts
Common-Law Marriage
Community Property
Prenuptial Agreements
Postnuptial Agreements
Tenancy by the Entirety
Disclaimers
Medicaid and Other Government Claims
Unclaimed Property
Tax-Oriented Estate Planning
Who Can Give Advice?

Chapter 13: Domestic Relations Orders
Reason for Retirement Plan Domestic Relations Order Provisions
Elements of a Domestic Relations Order
Elements of a Plan-Approved Domestic Relations Order
PADRO Distribution Before a Participant’s Severance
Survivor Benefits, Beneficiaries, and Loans
State Variations
Deciding Whether an Order is a PADRO
Plan Administration Procedures
Tax Treatment of a Distribution Under a Deemed QDRO
Tax Treatment of a Pre-2002 PADRO Distribution from a 457(b) Plan Bankruptcy
Divorce Negotiation
Lawyer’s Professional Conduct

Chapter 14: Impact of Bankruptcy Law on Participant Interests in Governmental Plans
Bankruptcy Overview
Governmental Plan Concerns
Chapter 7 Considerations
General
Excluding a Participant’s Interest from the Bankruptcy Estate
Exempting a Participant’s Interest
Turnover of a Participant’s Interest
Effect on Plan Loans
Role of Governmental Plan
Chapter 13 Considerations
General
Participant’s Interest as Disposable Income
Impact on Participant Contributions
Impact on Plan Loans
Role of Governmental Plan
Pending Legislation to Amend the Bankruptcy Code

Appendix A-Background Information on State and Local Governmental Plans

Appendix B-Uniform Management of Public Employee Retirement Systems Act (1997)

Appendix C-Uniform Prudent Investor Act