Governmental plan

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A governmental plan is an employee benefit plan sponsored by a governmental entity.

ERISA and Code Definition of Governmental Plan

ERISA provides that" "The term "governmental plan" means a plan established or 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. The term "governmental plan" also includes any plan to which the Railroad Retirement Act of 1935, or 1937 applies, and which is financed by contributions required under that Act and any plan of an international organization which is exempt from taxation under the provisions of the International Organizations Immunities Act." The term “governmental plan” includes a plan which is established and maintained by an Indian tribal government (as defined in section 7701 (a)(40) of title 26), a subdivision of an Indian tribal government (determined in accordance with section 7871 (d) of title 26), or an agency or instrumentality of either, and all of the participants of which are employees of such entity substantially all of whose services as such an employee are in the performance of essential governmental functions but not in the performance of commercial activities (whether or not an essential government function)."

29 U.S.C. Section 1002(32) (ERISA Section 3(32)).

Code Section 414(d) and ERISA Section 4021(b)(2) contain definitions of governmental plan that are parallel to the ERISA Title I definition.

DOL Interpretation

The terms “political subdivision,” “agency,” and “instrumentality” are not defined in ERISA, and no regulations issued pursuant to ERISA interpret those terms. The DOL takes the position that whether an entity is a political subdivision, agency or instrumentality of government for purposes of ERISA section 3(32) depends on the facts and circumstances of the relationship between government and the entity whose benefit arrangement's status as a “governmental plan” is in issue.

Tribal Plans

Plans maintained by Indian tribal governments are governmental plans if the tribal government performs "essential governmental functions." See PPA.


In the view of the DOL, a “governmental plan” as defined in ERISA section 3(32) is not limited to plans established by the unilateral action of employers that are governmental entities and plans that are within the exclusive control of governmental entities. See Advisory Opinion 79-36A. Rather, in determining whether a plan that covers only employees and former employees of a governmental entity is “established or maintained” by that governmental entity for its employees, the DOL has examined the extent to which a plan is funded by the governmental entity and the extent to which the governmental entity is involved in the administration or control of the plan. See id.; Advisory Opinion 79-83A; Advisory Opinion 86-24A.

In Revenue Ruling 89-49, however, the IRS held that a plan will not be considered a governmental plan merely because the sponsoring organization has a relationship with a governmental unit or some quasi-governmental power. The IRS believes that one of the most important factors to be considered in determining whether an organization is an agency or instrumentality of the United States or any state or political subdivision thereof is the degree of control that a governmental entity or entities exercise over the organization's everyday operations. Other factors include:

  1. whether there is specific legislation creating the organization,
  2. the source of funds for the organization,
  3. the manner in which the organization's trustees or operating board are selected, and
  4. whether the applicable governmental unit considers the employees of the organization to be employees of the applicable governmental unit.

Waiving Governmental Plan Status

Governmental plans may not waive their status, even for the purpose of seeking PBGC insurance.

ERISA Exemptions

A governmental plan is exempt from Title I of ERISA. 29 U.S.C. Section 1003(b)(1) (ERISA Section 4(b)(1)).

Tax Code Exemptions

Qualified Plans

Qualified plans with governmental status are exempt from many Tax Code requirements, but must:

403(b) Plans

A special catch-up contribution is available for certain public service employees with 15 years or more of service.

457 Plans and 409A

Code Section 409A does not apply to eligible 457 Plans but it does apply to ineligible 457 plans, including 457(f) arrangements maintained by governmental entities. See Notice 2007-62.

409A (Nonqualified Deferred Compensation)

Generally, 409A applies to governmental plans.

Correction of Governmental Plan Failures

EPCRS can be used to correct governmental plan failures that may affect tax qualification.

Governmental Welfare Plans


COBRA generally applies to governmental plans through the PHSA.


HIPAA generally applies to governmental plans through the PHSA.

Cafeteria Plans

Governmental entities may sponsor a cafeteria plan but must comply with the requirements of Code Section 125.


Rulings on Governmental Plan Status