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PROJECT PLAN AND REPORT OF THE TRIBAL PENSIONS SUBCOMMITTEE

FOR THE SEPTEMBER 16, 2020 TTAC MEETING

The Treasury/Tribal Advisory Committee (TTAC) subcommittee on Tribal Pensions (the

“Pensions Subcommittee”) will be seeking input from Tribal governments before making final

recommendations to the TTAC on guidance to enhance equal government status for Tribes under

the Pension Protection Act (the “PPA”), including related provisions under Internal Revenue

Code (the “Code”) Section 414 and Section 3(32) of the Employee Retirement Income Security

Act (“ERISA”). This initial report is intended to provide an outline of proposed guidance

recommendations and to secure additional input from TTAC members and other stakeholders.

This initial report does not reflect final guidance. 

The report includes background on the unique issues faced by Tribal employers who offer

retirement benefits for their employees and an initial set of core guidance principles for

consideration and further input. The report also provides a summary of broader topics and

concepts derived from Tribal Pensions Subcommittee deliberations since the last TTAC public

meeting of December, 2019. The Pensions Subcommittee will expand and fine tune the report as

public input and comments are received from Tribal governments and Tribal employers.

The TTAC supports the Pensions Subcommittee seeking additional Tribal input and ensuring

continued transparency in the development of guidance related to government status for Tribes

under the Code and ERISA. 

I. Important Background on Tribal Pension Issues.

When ERISA was enacted in 1974, it drew a line between government sector and private sector 

employers. Private employers were subject to ERISA and a new set of Code requirements and 

regulations. Government employers were exempt. 

The decision to treat governments differently was not an oversight. There were concerns that 

ERISA would infringe on sovereignty if applied to government employers. It was recognized 

that governments could raise tax revenues to secure benefit promises, if needed, while private 

companies could not. Congress understood that government employers were already subject to 

oversight through the political process and election cycles, while private employers were not. 

And the “equities” favoring ERISA regulation did not apply. In exchange for the added 

regulation of ERISA, private sector employers received “benefits” that government sector 

employers do not need: caps on liability (no punitive damages), limitations on jury trials, 

protection against conflicting state laws, and tax deductions. 

Unfortunately, the original “government” definition under Section 3(32) of ERISA and Section 

414(d) of the Code was silent on its treatment of Tribes. For more than 20 years, many tribal 

governments throughout the country asserted government status under ERISA and Code Section 

414(d). Tribes applied for and routinely received IRS governmental plan determination letters 

on their tax-qualified retirement programs. And while the IRS now takes a more limited view of 
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the scope of retirement plan determination letters, Tribes were comforted by the receipt of these 

governmental plan determinations for over two decades without challenge. As tribal gaming 

grew in the late 1990s and early 2000s, however, Tribes began to get push back from IRS and 

DOL on whether Tribes were truly “governments” under ERISA and Code Section 414(d). 

The federal agency push back on governmental status for Tribes resulted in a legislative effort to 

clarify once and for all that tribal governments were “governments” under ERISA and Code 

Section 414(d). After several Tribal parity bills were introduced in Congress, the Senate passed 

a bill (S. 1783) in the fall of 2006 that included tribal parity language. Unfortunately, the 

companion bill in the House did not include tribal parity language, and Congress was pressing 

hard to enact legislation that would become the Pension Protection Act (“PPA”). 

The PPA was pulled for a vote before all of the differences between the Senate and House bills 

were reconciled and before a final conference report was issued. Unfortunately, the draft being 

circulated within conference at that time included a parenthetical adding the essential 

government function and commercial activity limitations for Tribal governments and Tribal 

employers. The language included for Tribes when the PPA was presented for a vote stated that 

Tribes are entitled to government status for their employee retirement and welfare plans when 

the participants in those benefit programs are “employees ... 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)”

(emphasis added). The PPA, with the Tribal provision quoted above, was approved by Congress 

on the eve of a Congressional recess for a fall election cycle and with no debate or discussion 

regarding the Tribal provision. 

In the final analysis we are left with concepts added during a legislative conference process that 

was not completed, that are inconsistent with all prior House and Senate efforts on this issue, that 

received no debate or input from Tribes in the legislative process, have proven unworkable in 

other areas of taxation, and have now stood for more 14 years with no substantive guidance from 

the Departments of Treasury or Labor. 

II. Core principles for consideration and potential integration into PPA guidance:

The following represent core principles for which the Pensions Subcommittee believes there is a

high likelihood of consensus from Tribal stakeholders based on initial public meetings and input,

as well as subcommittee deliberations to date. This initial listing of core principles is not

intended to be an all-inclusive list as it is anticipated that the list will expand and be modified as

additional input is gathered and considered. 

The Pensions Subcommittee will take these core principles into account when developing

specific guidance. The Pensions Subcommittee will refine and add to these principles as

additional input is received and considered.

1. Alignment with the General Welfare Exclusion Act and TTAC Charter: 

Retirement benefits provide support to the overall general welfare of Indian Tribal

governments by helping to secure the financial future of individual citizens, as
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well as non-member citizens of surrounding communities, after their working

years end. Tribal Pensions are offered by Indian Tribal governments as a method

to support the general welfare of the Tribe and to attract, reward and retain

talented employees who can assist the Tribe with its governmental operations and

revenue generating activities. The TTAC is authorized to provide advice and

recommendations to Treasury regarding the taxation of Indians, in accordance

with the TTAC Charter. The TTAC has recognized Tribal Pensions as a priority

issue on which it will provide understanding and solutions to Treasury, in

connection with efforts to promote economic development in Indian Country and

to remove barriers to economic opportunity for Tribes. 

2. Governmental Parity: Guidance must strive for maximum parity between state

and Tribal governments to the fullest extent permitted under existing statutes. 

Currently state and local governments engage in many of the same activities in

which Tribal governments engage, without losing governmental status: e.g., state

lotteries; convention centers / hotels; marinas; tourism; golf courses. 

3. Ambiguity Construed in Favor of Tribes: Guidance should take in to account

the Tribal canon of statutory construction whereby ambiguity in federal statutes

must be construed in favor of Tribal governments.

4. Raising Revenue as an Essential Government Function: Guidance should

recognize that raising revenue for public purposes is an essential government

function. In this regard, there should be recognition that Tribes typically do not

have the type of property tax base often used by other governments, and that

Tribal sales tax revenues are often limited by issues of state dual taxation and

rural geographical locations.

5. Public Versus Private Use of Funds: Guidance must take into account the

difference between Tribal enterprises that raise revenue for public purposes versus

commercial entities that are operated for private gain.

6. Consultation and Negotiated Rule Making: Guidance must reflect

government-to-government consultation and a cooperative rulemaking process

between Tribes and federal agencies, consistent with Executive Order 13175. 

III. Interim Guidance and Legislative Correction:

1. Deference to Tribal Sovereignty: Unless specifically defined in the Internal

Revenue Code, Treasury guidance shall defer to the sovereign authority of Tribes

to define the scope, purpose and function of their governmental activities.

2. Updated Transition Relief: While legislative solutions and detailed guidance

are being developed, the transition relief in Notice 2007-67 should be updated and

expanded. The relief should continue to recognize Tribes’ good faith efforts to

comply with the PPA, allow Tribes the flexibility to modify the design of
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retirement plans to fit their employment and fiscal needs, and identify the Code

and ERISA compliance requirements that will not apply until guidance is

finalized. 

3. Guidance before Enforcement: Tribal governments should not be subject to

PPA enforcement actions, and Tribal government status should not be challenged,

until after clear guidance is issued. An enforcement moratorium similar to the

General Welfare Exclusion Act audit suspension should be considered. An

enforcement moratorium was put in place by federal agencies in the past when

similar pension compliance issues were addressed for state and local

governments.

4. Legislative Elimination of “Essential Governmental Function” and

“Commercial Activity” Tests: In tandem with the guidance projects identified

herein, legislative options to permanently eliminate the “essential government

function” and “commercial activities” tests, as applied to Tribes, should be

pursued. 

5. Legislative Recognition of Tribal Courts and Tribal Laws: Any legislative

efforts should include the recognition of Tribal courts and Tribal laws in the

resolution of retirement plan claims and the issuance of qualified domestic

relations orders for retirement plans.

IV. Specific Concepts under Consideration:

The following represent specific concepts under consideration for the possible development of

guidance. This initial listing is not intended to be an all-inclusive list as it is anticipated that the

list will expand and be modified as additional input is gathered and considered. 

1. Definition of Essential Governmental Functions:

Issue: Essential governmental functions should be defined in a manner that

affords Tribes parity with other governmental entities and recognizes the

fundamental need of Tribes to generate revenue.

Possible Guidance Solution: Consider guidance as follows: 

(A) The generation of revenue for public/Tribal purposes must be prioritized

over function or activity (regardless of whether the activity engaged in

would be considered, itself, an essential governmental function), because

Tribes do not have the same revenue generation opportunities as state and

local governments. 

(B) Consider the Tribes’ public purposes/needs in relation to the average

levels at which Tribes are funded by the federal government and the

remaining need.
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(C) Specifically address the tax base issues that limit tax revenue for Tribes.

2. Definition of “Commercial”

Issue: Whether there is a difference between “commercial” activities that are

engaged in for private interests or those by a government to raise revenues

for public purposes.

Possible Guidance Solution: Consider guidance as follows: 

(A) Activities engaged in for public purposes are not “commercial” in nature.

For example: States engage in gaming (lotteries) to raise revenues for

public purposes. Cities also routinely operate convention centers and

hotels. 

(B) Activities engaged in for private gain may be commercial in nature.

(C) Regardless of the use of the term “commercial activities” in the Code and

ERISA, guidance needs to distinguish between activities and purpose. 

Otherwise, any state or city that performs the same activity as MGM or

Hilton is performing a “commercial activity.”

(D) Any revenue generating activities conducted to support the overall general

welfare of the Tribe, are operated in the best interest of the Tribe and not

for the benefit of shareholders or private interests that are independent of

and not directly related to the Tribe. Tribal citizens who are enrolled

shareholders (members) of Tribes or Alaskan Native regional and village

corporations under ANSCA are not to be considered or treated as entities

holding private interests in a Tribe or a Tribe’s revenue generation.

3. Control Group Testing:

Issue: Private sector and ERISA covered employers are subject to certain

retirement plan compliance requirements that do not apply to

governmental employers. A significant component of the private sector

compliance testing is the “control group” rules, which require the

employer to treat all related entities as a single employer. The control

group rules are intended to, and effectively, make it harder for different

entities to have different benefit structures. Tribal governments and their

various enterprises often have very different employment bases, needs and

revenue flows. The application of control group rules to Tribes or any

subset of Tribal employers (“commercial activity” employers)

significantly limits Tribal control over employee benefits and the related

costs. The practical result of imposing control group requirements on
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Tribal employers is likely to be the elimination of retirement benefits for a

portion of the Tribal employee population.

Possible Guidance Solution: Consider guidance as follows: 

(A) Tribes should be afforded the same flexibility to design different employee

benefits for their various employment groups that state and local

governments enjoy; control group requirements should not apply to

Tribes.

(B) Control group rules under the Code are written in terms of stock

ownership and other corporate control concepts. Tribes do not establish

and operate enterprises in the same manner as private sector businesses

and the interim guidance for Tribes should recognize that the current Code

rules do not apply to Tribal employers. 

4. Employee Sharing, Transfers and Rehires:

Issue: Tribes often experience a high level of employee movement among Tribal

employers, as well as a high level of rehire activity. Employees also may

be shared among Tribal employers for the efficient use of resources and

talent, such as HR and IT professionals. Tribal employment functions that

may be classified as commercial activities are significantly limited in their

ability to accommodate these unique Tribal employment issues, due to

private sector and ERISA compliance requirements. Governmental

compliance standards for retirement plans allow for flexibility and easily

accommodate employee rehires and sharing arrangements.

Possible Guidance Solution: Consider guidance as follows: 

(A) Consider a good faith compliance standard for addressing rehires in Tribal

retirement plans with regard to the service crediting rules and rehire

requirements under the Code and ERISA. A similar standard has been

implemented for governmental employers with regard to minimum

required distributions, a similarly complex area of retirement plan

compliance.

(B) Consider guidance that allocates any employee of the Tribal government

who provides shared services to a Tribal enterprise to the governmental

retirement plan and eliminate the potential need to enroll a single

individual in two or more retirement plans at the same time. 

(C) To the extent that Tribal employers are required to maintain separate

retirement plans for various Tribal entities and enterprises, consider an

exemption from ERISA plan asset requirements that will allow an

employee’s accumulated retirement plan balance to be transferred between
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plans maintained by the Tribe, as the employee moves to different

positions. The current inability to move an employee’s balance between

plans when the employee moves has a significant impact on retirement

plan loans, hardship withdrawals and administrative costs.

5. Domestic Relations Orders:

Issue: ERISA and the Code currently recognize plan distributions pursuant to

state domestic relations laws. Under both the governmental and

commercial retirement plan rules, Tribal members may be forced to

address divorce issues in state rather than Tribal courts or in more than

one forum. 

Possible Guidance Solution: Consider guidance as follows: 

(A) Confirm that Tribal court and Tribal domestic relations laws should be

given full recognition, on par with state domestic relations laws.

6. Combined Assets:

Issue: When a Tribal government is forced to maintain more than one retirement

plan for its workforce in order to retain governmental status, they often

incur duplicative expenses. Retirement plans are operated and priced on

an individual plan, average account balance basis. The plan maintained

for a Tribal government workforce may be much smaller than the plan

maintained for a Tribal enterprise. Not only will the plans be priced

differently and have access to different classes of service providers and

services, the Tribe will have less bargaining power with divided asset

pools. 

Possible Guidance Solution: Consider guidance as follows: 

(A) Create a mechanism that allows retirement plans to operate with joint trust

funds, subdivided as necessary to reflect the assets of each participating

retirement plan. The auditing of commercial plan assets must be

accommodated in this topic, as well as the certification of assets required

for an ERISA limited scope audit. 

(B) Consider similar bargaining power and pricing issues for Tribal health

plans that also are subject to the current governmental vs commercial legal

structure. Health plans that are divided into governmental plans and

commercial plans have smaller risk pools which can mean less security for

plan participants.
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7. Coordination with CPA Audit Standards:

Issues: Form 5500 filings in many cases require audited financial statements for

the retirement plan. The ERISA audit standards for CPAs do not address

the unique issues faced by Tribal plans. This can make the standard

ERISA audit process very costly for Tribes and in some cases result in

filing delays. There also is no coordination between the ERISA audit

standards for commercial plans and the GASB fiduciary fund audit

requirements for Tribes. With regard to some retirement plans, it is

possible that a single Tribal retirement plan may need an ERISA audit and

GASB compliant financial statements, each prepared under different rules. 

Possible Guidance Solution: Consider guidance as follows: 

(A) Incorporate good faith compliance standards for Tribal retirement plan

audit issues into updated transition guidance under the PPA. Encourage

the audit of and reporting on Tribal retirement plans, without the threat of

penalties for compliance deficiencies in areas where no guidance has been

finalized (such as definitions of PPA standards, application of control

group testing). 

(B) Until such time as the audit requirements under ERISA and GASB are

coordinated, provide administrative relief that will eliminate the need for

Tribal entities to obtain two audits of retirement plan financial statements

for the same time period.

8. State Court Enforcement Actions:

Issue: ERISA provides for litigation over benefit claims in state or federal court,

but many Tribes have their own court systems. If Tribes are treated as

“commercial,” Tribal governments may be forced to answer and defend

law suits in state court.

 

Possible Guidance Solution: Consider guidance as follows: 

(A) Confirm that Tribal court and Tribal law should be given full recognition

on par with state court and state laws.

(B) Incorporate Tribal court exhaustion into any judicial access procedures for

federal or state court.

9. Prospective Enforcement:

Issue: Some Tribes have been subject to Form 5500 penalty assessments and

enforcement actions pending guidance under the PPA. 
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Possible Guidance Solution: Consider guidance as follows: 

(A) Consider prospective enforcement and temporary administrative relief that

would offer certainty to Tribes pending final guidance. 

(B) Consider parity issues between Tribes that make good faith, but

incomplete, Form 5500 filings, and Tribes that are not making annual

filings under the current transition guidance. 

(C) Consider prospective effects of all future guidance.

V. Collection of Retirement Plan Data from Tribes for Analysis

The Pensions Subcommittee would benefit from data and additional information from Tribes

regarding the types of retirement plans offered by Tribal employers. The Pension Subcommittee

also is acutely aware of the sensitive nature of this data. Data and research shall be collected by

third party researchers to protect confidentiality and sensitivity of Tribal information. The third

party researcher shall be approved by all related and applicable university, local, State, Federal

and Tribal Institutional Review Board, Human Subject Review and other necessary research

approvals.

Data that is important to the Pension Subcommittee may include, but is not limited to, the

following types of data:

• Tribal employee groups covered by retirement plans

• Identification of retirement plan population as tribal members, non-member native

employees, non-native employees

• Types of plans offered: defined benefit, cash balance, defined contribution, 401(k),

403(b), 457

• Governmental or commercial status of current retirement plans

• Identification of low and high compensation ranges for covered employees

• Information on shared employees providing services to various tribal units

• Employee turnover rates and timing for tribal employment groups

• Information on retirement plan audit protocols

• Information on the availability of a Tribal court system that can be accessed to handle

retirement plan claims and domestic relations matters