With some recent suggestions from both CUNA and NAFCU, theIRS may be one step closer to providing guidance on determiningwhether a retirement plan offered by federal credit unions areconsidered a governmental plan under the Internal RevenueCode.

More than seven years in the making, the issue first came tolight in 2004 when the IRS issued a private letter ruling thatstated that a FCU was not an eligible employer under Section 457 ofthe IRC because it was a federal governmentinstrumentality.

The letter ruling, however, failed to say which section of thecode would apply to FCUs, leaving them under a cloud of uncertaintywith respect to their existing 457 plans that they had establishedmany years before. To address the concerns of FCUs, the IRS issueda notice that gave relief to any FCU that had a 457 plan in effecton Aug. 15, 2005. While the notice may have been helpful to FCUswith existing 457 plans, it did not address whether a FCU could setup a new 457 plan.

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