Working with an indian nation in Oklahoma. I realize they can have 401(k) plans since Small Busines Job Protection, however am having trouble find out about their status - do they file 5500 Series, audits, etc. Would appreciate any help with indian nations.

As far as I can make out, the situation is completely muddy. There are two potential arguments for treating a plan of an Indian tribal government as not subject to Form 5500 requirements. The first would be to argue that a plan of an Indian tribal government is a "governmental" plan. IRS Announcement 82-146 eliminates the Form 5500 filing obligation with respect to governmental pension plans (which for this purpose would include 401(k) plans). The second would be to argue that Indian tribal governments are normally exempt from all regulations not specifically intended to apply to them.

As to the first argument, Internal Revenue Code ("Code") section 414(d) and ERISA section 3(32) define a governmental plan as a "plan established and maintained for its employees by the Government of the United States, by the government of any State or political subdivision thereof, or by any agency or instrumentality of any of the foregoing." Code section 7701(a)(10) includes the District of Columbia as a State, but does not mention Indian tribal governments. Code section 7871 treats Indian tribal governments as states for certain purposes, including for purposes of maintaining section 403(B) annuities. However, it does not list 401(a), 414(d), or 6047 (the section imposing Form 5500 requirements) as being among the Code sections for purposes of which an Indian tribal government is considered a state government.

As to the second argument, PBGC Opinion Letter 81-3 holds that a corporate council of elected governmental officials of several Indian tribes that was established to coordinate the distribution on Indian reservations of federal (and, to some degree, state and private charitable) funds is exempt from ERISA. The basis for this determination was not specifically that the plan was a "governmental plan," but that "while the exercise by Indian tribes of their powers as sovereign nations is subject to limitation by action of Congress, legislation will not be presumed to limit tribal sovereignty in the absence of specific language stating that intent." By contrast, Smart v. State Farm Insurance Company, 10 E.B.C. 2060 (7th Cir. 1989) applied ERISA to a group insurance plan maintained by an Indian tribe for employees of a tribal health center. And even the PBGC, in Opinion Letter 89-9, held that a defined benefit plan maintained by a factory owned by an Indian tribal government was not exempt from ERISA where the factory was "an off-reservation operation, most of whose employees, and all of whose customers, are non-Indian."

And apparently, even Congress does not know the answer to this one. The Conference Report on the Small Business Protection Act states with respect to the provision permitting Indian tribal governments to maintain 401(k) plans that "no inference is intended with respect to whether Indian tribal governments are permitted to maintain qualified cash or deferred arrangements under present law." The only reason that Indian tribes would have been prohibited from having 401(k) plans before the SBJPA would be if they were treated as state governments. (An Indian tribal government would not be an organization "exempt from tax under this subtitle" within the meaning of Code section 401(k)(4)(B)(i), because its tax exemption derives from sources outside of the Code.)

Thus, Congress apparently decided to resolve the immediate issue of whether Indian tribal governments could have 401(k) plans without expressing an opinion on whether they should otherwise be considered "governmental" for purposes of the Code and ERISA. And that omission has all sorts of consequences, even beyond the Form 5500 filing requirement--e.g., whether plans of Indian tribal governments are exempt from Title I of ERISA, or from the various Code provisions from which governmental plans are exempted.

I don't know whether any of this helps, but at least you are not alone in being confused.

Having worked with several New Mexico, Arizona and Nevada Indian tribes; Zuni,Acoma,Taos, Navaho and others, I was initially unsure whether or not to file a 5500 so I did anyway. The net result was that the IRS returned the 5500 filing with a letter stating that the tribes were not required to file the 5500.
Indian tribes are also the only groups that can rollover from a 403 (B) to a 401 (k).

Thanks, Larry! As usual, all the research in the world can't substitute for practical experience.

One question: were the plans involved ones which covered employees performing routine "governmental" type services? At least at the PBGC, there seems to be a distinction made between plans which cover employees who perform governmental functions, and those which cover employees who operate businesses, even if the businesses involved are run by a tribal government. I am wondering whether IRS makes the same distinction.

The filing requirement was applicable to both tribal functions and to business functions such as the casinos and arts and crafts businesses. In those instances where there was both, they were treated as a controlled group or affiliated service groups.

So the IRS returned even those Forms 5500 which included business functions such as the casinos and arts and crafts businesses? Sounds like they are taking a more liberal position than the PBGC did in the Opinion Letters I cited.

A useful page on the web, what a great concept.
I am helping a tribal government establish a 401K for the membership. We have prepared a prototype document with specific language designating per-capita payments made to all members based on revenues from all tribal businesses as elegible for contributions to the plan. This is not w-2, it is 1099. Any advice? Is this step necessary?
Thank you.

When a Native American Indian Tribe creates
a retirement plan, the plan sponsor should consider the effect of tribal law. If the plan is not covered by ERISA, the plan may
be governed primarily by the Tribe's law. See Jones v. Mechan, 175 U.S. 1, 20 S.Ct. 1 (1899). In particular, "default" rules for the absence of a beneficiary designation may be different.

I'm replying to dgwilliam's post concernig 401(k) deferrals of per-capita payments reported on 1099s. How is ths possible, if the payments are not derived from an employer of the tribal memebers?

401(k)(1)provides that cash or deferred arrangements may be part of a profit-sharing or stock bonus plan, a pre-ERISA money purchase plan, or a rural electric cooperative plan. I assume you are considering a profit sharing plan. 401(a)(1) provides for contributions by the employer maintaining the plan, its emlpoyees or both. Unless the per-capita payments are employment related, I don't see how they are eligible to be deferred under a 401(k) arrangement. I'd appreciate hearing views to the contrary.

Thank You

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For those of you who may have missed the notice on Benefits Buzz page, a case has now come down clarifying this issue. Colville Confederated Tribes v. Somday, 2000 U.S. Dist. LEXIS 7037 (E.D. Wash. 2000) held that a plan of an Indian tribal government was a "governmental plan" for ERISA purposes.

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Employee benefits legal resource site

VC Calhoun:

How do you reconcile Colville Confederated Tribes v. Somday's conclusion that retirement plans of Indian Tribes are "governmental plans" with your comments that Indian tribes are excluded from Section 457 requirements? (See Who is a 457 Employer). Do you know what type of plan was involved in Somday? I read the opinion and found no reference to the type of plan involved in the case.

Only state and local government plans are subject to 457. Thus, a governmental plan which is not a state or local government plan (e.g., a federal government plan, a plan of an international organization, or a plan of an Indian tribe) is not subject to 457.