Department of the Treasury — Internal Revenue Service
Pilot Questionnaire for
Governmental Plans Initiative
OMB No. 1545-2071
Pages 1 through 4 provide a background of the IRS Governmental Plans Initiative. Pages 5 through 24
include 65 questions to be completed by your Plan.
Overview of Governmental Retirement Plans
Over 20 million employees work for state and local governments. There are approximately 79,000 state and
local governments; 16,000 public educational employers; and 1,100 public health care institutions.
Governmental retirement plans are a common feature of the compensation packages provided to state and
local government employees. Since there is no federal filing requirement for these plans, the precise number
of governmental retirement plans is not known. Although defined benefit plans are most common, defined
contribution plans and so-called “hybrid plans” offered by state and local governments also play an important
role in overall retirement security for public employees.
We have limited experience with governmental plans. These plans have been the subject of a handful of
studies over the past few years. These include two Government Accountability Office (GAO) reports studying
various issues including participation, funding, actuarial assumptions, and investment returns; Governmental
Accounting Standards Board (GASB) projects currently studying accounting rules pertaining both to the
governmental employer and to the plan; and others such as the PEW report entitled “Promises with a Price –
Public Sector Retirement Benefits” which studied funding, financial reporting, and investment returns.
Role of IRS in Governmental Plans Oversight
Governmental plans are subject to several tax qualification requirements, including that the plan must operate
for the exclusive benefit of the plan’s employees (section 401(a)(2)), section 401(a)(17) and section 415
annual compensation and benefit limitations, section 401(a)(9) minimum distribution rules, rollover and plan
loan rules, and rules regarding the provision of retiree health benefits in a pension plan (section 401(h)).
Governmental plans are also required by federal tax law to have a written plan document that details how the
plan will operate and the benefits it will provide, to operate in accordance with the plan’s terms, and, when
applicable, to specify the actuarial assumptions to be used to define plan benefits in a way that precludes
employer discretion. These federal tax law requirements were enacted to protect the tax-deferred retirement
benefits of public sector employees. Failure to satisfy these requirements may disqualify the plan and result in
taxable events that would negatively impact the plan’s participants.
While a determination letter is not required in order for a governmental plan to be tax-qualified, upon voluntary
application, the IRS will make a determination of whether a retirement plan meets the qualification
requirements of the Code, including timely adoption of amendments to comply with applicable tax law
changes. Under Code section 401(b) and Revenue Procedure 2007-44, all section 401(a) governmental plans
are required to be amended to comply with applicable tax law changes (detailed in the 2007 Cumulative List,
published in Notice 2007-90) no later than January 31, 2009 (Cycle C); however, the IRS has recently
announced its intent to permit governmental plans to file for a determination letter in either Cycle C or Cycle E
(i.e., from February 1, 2010 to January 31, 2011). In the case of governmental plans, the IRS has also
modified the requirements for proof of compliance with prior law to only require that governmental plans show
compliance with the federal pension laws back to the amendments required by GUST. (See the
“Governmental Plans” webpage (www.irs.gov/ep) for a FAQ that discusses this situation.)
Form 14035 (Rev. 02-2009)
Catalog Number 52098A
Department of the Treasury - Internal Revenue Service