The U.S. Department of the Internal Revenue Service issued the Alameda County Employees’ Retirement Association (ACERA) a favorable tax determination letter on January 29, 2014. The favorable determination letter indicates that in the opinion of the IRS, ACERA satisfies the qualification requirements of Internal Revenue Code section 401(a) and is therefore is a qualified public retirement plan entitled to favorable tax treatment. The determination is subject to ACERA’s adoption of amendments proposed by the IRS, as well as proposed amendments to the County Employees’ Retirement Law.
Some examples of favorable tax treatment that ACERA is entitled to would be that members’ employee retirement contributions are tax deductible each year they are made, investment earnings on them may accumulate tax free, and income taxes won’t be owed by members until they receive a benefit. Employee retirement plans that do not satisfy IRS requirements are not entitled to such favorable tax treatment.
ACERA’s Participating Employers now have assurance that the terms of the ACERA plan satisfy the IRS qualification requirements. To remain a qualified plan, ACERA must satisfy IRS requirements in both the plan documents and operation of the plan. ACERA will be reviewed periodically, on a five year remedial amendment cycle.
For more information on the significance of ACERA’s favorable determination letter, please refer to IRS Publication 794.