Governmental plans participating in group trusts may need to be amended, IRS notes


Certain governmental plans may need to be amended to satisfy the “exclusive benefit” requirements of Rev. Rul. 2011-1, according to the latest edition of the IRS Employee Plans News. Rev. Rul. 2011-1 requires each group trust retiree benefit plan that adopts the group trust to expressly state in its governing document that no part of the corpus or income of the group trust retiree benefit plan would be used for, or diverted to, purposes other than for the exclusive benefit of the plan participants and their beneficiaries.

Under IRS Notice 2012-6, governmental plans may need to be amended to add the exclusive benefit requirement by the earlier of: (1) the close of the first regular legislative session of the legislative body with the authority to amend the plan that begins on or after January 1, 2012, or (2) January 1, 2015. This deadline applies to Code Sec. 401(a)(24) governmental plans for which the authority to amend the plan is held by a legislative body that meets in legislative session, and whose assets are pooled with other group trust retiree benefit plans in a group trust established under Rev. Rul. 81-100.

The IRS notes, however, that a Code Sec. 401(a)(24) governmental plan doesn’t need to be amended if it is already subject to the exclusive benefit requirement under a statute or other rule under state law. Also, the IRS recognizes that governmental plans may not have a single, cohesive plan document. For example, the IRS allows sponsors of governmental plans applying for determination letters to submit portions of a statute that apply to the governmental plan containing general plan provisions and other documents binding on the plan that contain additional plan language (for example, provisions of regulations, ordinances and other state rules or policies applicable to the plan under state law). The IRS will apply the same rule to determine whether the governing document of a governmental plan satisfies the exclusive benefit requirement.

Source: IRS Employee Plans News, Issue 2012-4, November 29, 2012.

For more information, visit

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer’s Benefits Reports.

Visit our News Library to read more news stories.