The Internal Revenue Service (IRS) has issued an advance notice of proposed rulemaking to release rules being considered for determining governmental plan status for qualified retirement plans under Internal Revenue Code (Code) section 414(d). The guidance includes draft proposed regulations, a solicitation for comments, and detailed discussions of the history of governmental plans and the various standards that have been applied by the IRS, Department of Labor (DOL), Pension Benefit Guaranty Corporation (PBGC) and the courts to define governmental plans, as well as summaries of the rules that governmental plans are subject to, or exempt from, under the Code.

Although the draft proposed regulations would be issued under Code section 414(d) to define governmental plans for purposes of the rules for qualified retirement plans under Code section 401(a), the guidance says that the rules would also apply for purposes of the tax shelter annuity requirements under Code section 403(b) and the deferred compensation requirements of Code section 457. In addition, the guidance indicates the IRS consulted with both DOL and PBGC on the standards included in the draft proposed regulations and that the agencies believe there should be a coordinated set of rules to determine governmental plan status for purposes of the Code and Titles I and IV of the Employee Retirement Income Security Act (ERISA).