"Crunch time has come for Tribes to review whether their employee benefit plans are "governmental," in light of the Internal Revenue Service "Advance Notice of Proposed Rulemaking" issued November 7.

Five years ago, in the Pension Protection Act of 2006, Congress provided that Tribal employee benefit plans would not be treated as "governmental" unless all the participants are individuals "substantially all of whose services ... are in the performance of essential governmental functions but not in the performance of commercial activities (whether or not an essential government function)." This requires Tribal employee benefit plans covering any "commercial" employees to fully comply with the requirements of the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code of 1986 (IRC) in the same manner as private sector business employer plans. Although this change was technically effective January 1, 2007, there was little guidance at the time. IRS Notice 2006-89 therefore called for reasonable good faith compliance" pending guidance, but specified (following Congressional staff's 2006 technical explanation of the Pension Protection Act) that employees of a hotel, casino, service station, convenience store, or marina, are employed in commercial activities. This means that they must be covered under a separate plan if "governmental" status for the plan covering governmental function employees is to be preserved. IRS Notice 2007-67 extended the compliance deadline to a date six months after guidance is issued.

The "advance notice" of the proposed regulations is now out, along with a request for comments that are due to be filed by February 6, 2012."

Get the Story:
Frank P. VanderPloeg and Alan R. Fedman: Are Tribal Benefit Plans "Governmental"? (Mondaq.com 11/30)
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