News Release IR-1869 - Employee Benefits Legal Resource Site

News Release IR-1869 (Posted on August 10, 1977 by Carol V. Calhoun)

Trusts under governmental plans will not be taxed, regardless of whether they are qualified. This document was the source of the original moratorium on the application of nondiscrimination rules to state and local governmental plans. That moratorium has now been codified, so the News Release is obsolete in that respect. However, in a seldom-noticed second holding, it stated that trusts under governmental plans would, until further notice, be treated as nontaxable, even if the plan they were funding was not qualified. This has interesting implications, as well, for the extent to which a governmental plan may be subject to unrelated business income tax if it has investments that would normally be considered unrelated business taxable income.

Carol V. Calhoun

The author of this site has now retired. The contents of this site are maintained for archival purposes only, and may not be up to date.

News Release IR-1869, August 10, 1977

Washington, D.C. — The Internal Revenue Service today said that issues concerning discrimination and the taxability of the income of trusts relating to state and local government employee retirement plans will not be raised until a review of these matters is completed.

The IRS is reconsidering whether the statutory prohibition against discrimination in coverage and contributions or benefits, under Section 401(a) of the Internal Revenue Code, applies to plans covering various elected and appointed officials of state and local governments. Also under consideration is whether the trusts relating to such plans are subject to tax on their income.

Pending completion of the review, the IRS will resolve these issues in favor of the taxpayer or governmental unit.

August 10, 1977

Related Posts: