[Federal Register Volume 72, Number 116 (Monday, June 18, 2007)]
[Rules and Regulations]
[Pages 33387-33388]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-11636]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 9331]
RIN 1545-BG46


Deemed IRAs in Governmental Plans/Qualified Nonbank Trustee Rules

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations and removal of temporary regulations.

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SUMMARY: This document contains final regulations under section 408 of 
the Internal Revenue Code. The final regulations provide special rules 
for a governmental unit which seeks to qualify as a nonbank trustee of 
a deemed IRA that is part of its qualified employer plan. These final 
regulations affect only such governmental units.

DATES: Effective Date: June 18, 2007.
    Applicability Date: For dates of applicability, see Sec.  1.408-
2(e)(8)(iv).

FOR FURTHER INFORMATION CONTACT: Linda L. Conway, 202-622-6090, or 
Cathy A. Vohs, 202-622-6090 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background

    This document contains final amendments to the Income Tax 
Regulations (26 CFR Part 1) under section 408 of the Internal Revenue 
Code of 1986 (Code). On July 22, 2004, temporary and proposed 
regulations under section 408 were issued. A notice of proposed 
rulemaking (REG-101447-04) was published in the Federal Register (69 FR 
43786). The text of the temporary regulations also served as the text 
of the proposed regulations. The text of temporary Sec.  1.408-2(e)(8) 
was published in the same issue of the Federal Register (69 FR 43735). 
The RIN published in connection with that notice of proposed rulemaking 
was 1545-BD07. However, due to technical difficulties that RIN is no 
longer valid and the RIN number of these final regulations is 1545-
BG46. No comments were received regarding the proposed regulations.

Explanation of Provisions and Summary of Comments

    These final regulations amend Sec.  1.408-2(e) of the regulations 
to provide that a governmental unit may serve as the trustee of any 
deemed IRA established by that governmental unit as part of its 
qualified employer plan if that governmental unit establishes to the

[[Page 33388]]

satisfaction of the Commissioner that the manner in which it will 
administer the deemed IRA will be consistent with the requirements of 
section 408. These final regulations also provide special rules 
regarding the application of Sec.  1.408-2(e) to governmental units. 
These final regulations are adopted without substantive change from the 
proposed and temporary regulations. These final regulations are 
applicable for written applications made on or after June 18, 2007. The 
rules in this section also may be relied on for applications submitted 
on or after August 1, 2003 (or such earlier application as the 
Commissioner deems appropriate) and before June 18, 2007.

Special Analyses

    It has been determined that this Treasury Decision is not a 
significant regulatory action as defined in Executive Order 12866. 
Therefore, a regulatory assessment is not required. It also has been 
determined that section 553(b) of the Administrative Procedure Act (5 
U.S.C. chapter 5) does not apply to these regulations, and, because the 
regulation does not impose a collection of information on small 
entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not 
apply. Pursuant to section 7805(f) of the Code, the notice of proposed 
rulemaking preceding these final regulations was submitted to the Chief 
Counsel for Advocacy of the Small Business Administration for comment 
on its impact on small business.

Drafting Information

    The principal author of these regulations is Linda L. Conway of the 
Office of the Division Counsel/Associate Chief Counsel (Tax Exempt and 
Government Entities). However, other personnel from the IRS and 
Treasury Department participated in the development of these 
regulations.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Adoption of Amendments to the Regulations

0
Accordingly, 26 CFR part 1 is amended as follows:

PART 1--INCOME TAXES

0
Paragraph 1.The authority citation for part 1 continues to read in part 
as follows:

    Authority: 26 U.S.C. 7805 * * *

0
Par. 2. Section 1.408-2(e)(8) is revised to read as follows:


Sec.  1.408-2  Individual retirement accounts.

* * * * *
    (e) * * *
    (8) Special rules for governmental units--(i) In general. A 
governmental unit that seeks to qualify as a nonbank trustee of a 
deemed IRA that is part of its qualified employer plan must demonstrate 
to the satisfaction of the Commissioner that it is able to administer 
the trust in a manner that is consistent with the requirements of 
section 408. The demonstration must be made by written application to 
the Commissioner. Notwithstanding the requirement of paragraph (e)(1) 
of this section that a person must demonstrate by written application 
that the requirements of paragraphs (e)(2) through (e)(6) of this 
section will be met in order to qualify as a nonbank trustee, a 
governmental unit that maintains a plan qualified under section 401(a), 
403(a), 403(b) or 457 need not demonstrate that all of these 
requirements will be met with respect to any individual retirement 
accounts maintained by that governmental unit pursuant to section 
408(q). For example, a governmental unit need not demonstrate that it 
satisfies the net worth requirements of paragraph (e)(3)(ii) of this 
section if it demonstrates instead that it possesses taxing authority 
under applicable law. The Commissioner, in his discretion, may exempt a 
governmental unit from certain other requirements upon a showing that 
the governmental unit is able to administer the deemed IRAs in the best 
interest of the participants. Moreover, in determining whether a 
governmental unit satisfies the other requirements of paragraphs (e)(2) 
through (e)(6) of this section, the Commissioner may apply the 
requirements in a manner that is consistent with the applicant's status 
as a governmental unit.
    (ii) Governmental unit. For purposes of this special rule, the term 
governmental unit means a state, political subdivision of a state, and 
any agency or instrumentality of a state or political subdivision of a 
state.
    (iii) Additional rules. The Commissioner may in revenue rulings, 
notices, or other guidance of general applicability provide additional 
rules for governmental units seeking approval as nonbank trustees.
    (iv) Effective/applicability date. This section is applicable for 
written applications made on or after June 18, 2007. The rules in this 
section also may be relied on for applications submitted on or after 
August 1, 2003 (or such earlier application as the Commissioner deems 
appropriate) and before June 18, 2007.


Sec.  1.408-2T  [Removed]

0
Par. 3. Section 1.408-2T is removed.

Kevin M. Brown,
Deputy Commissioner for Services and Enforcement.
    Approved:
Eric Solomon,
Assistant Secretary of the Treasury (Tax Policy).
 [FR Doc. E7-11636 Filed 6-15-07; 8:45 am]
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