A pro-sovereignty initiative to ensure that tribal pension plans fall under
government regulations has garnered widespread support in Indian country,
and awaits action by Congress.
The federal government regulates all pension plans under two sets of rules,
one for private-sector businesses and another for governments. Government
plans have more flexibility and are exempt from costly testing, reporting,
auditing and penalty requirements.
The problem is that the statute dealing with pension plans under government
regulations does not include "tribal governments" along with federal, state
and municipal governments in the definition of "government."
In early September, a broad coalition of tribes and tribal organizations,
including the United South and Eastern Tribes and the National Congress of
American Indians, wrote to Rep. Bill Thomas, R-Calif., chairman of the Ways
and Means Committee, urging him to include in a pension reform bill he is
crafting a provision clarifying that tribal governments have the same
ability as federal, state and local governments to self-regulate their
employee benefit plans.
The provision emerged from a separate bill brought forward by Reps. J.D.
Hayworth, R-Ariz., and Dale Kildee, D-Mich., co-chairs of the House Native
American Caucus. Twenty-six bipartisan members of Congress support the
initiative, as well as key Senate members.
Until last year, the Internal Revenue Service routinely approved tribal
pension plans under the government regulations, said Robert Yoder, an
Arizona attorney who designs tribal pension programs, 401 (k) programs,
welfare programs and trusts, and advises tribal employers on tax compliance
and employment law issues.
But in 2003, the IRS began to question whether tribal governments are truly
"governments" under the Internal Revenue Code and the Employee Retirement
Income Security Act, Yoder said.
Yoder enlisted lobbyist Ed Ferrigno from the Profit Sharing Council of
America (a nonprofit pension association that supports equal government
status for tribes), and the two took up the cause of assuring that tribal
plans would come under the public sector regulation rather than the private
"The more tribes are treated as 'businesses,' the easier it is to justify
more regulations and more taxation. To resolve this matter and guard
against the further erosion of tribal sovereignty, we have spent the past
two years actively pursuing new legislation that would clarify once and for
all that tribal governments are governments under the law," Yoder said.
Some tribes have pension plans under the private-sector rules simply
because that's what they've been "sold" by investment firms and insurance
companies "that are more concerned with getting money in the door, than
with saving tribes from regulatory burdens or sovereignty waivers," Yoder
The provision is important not only because it recognizes and reiterates
tribal sovereignty and the government-to-government relationship with the
United States, but also because government pension plans provide an array
of benefits not available under the private rules, Yoder said.
For example, under private-sector plans, tax-exempt tribes are required to
bear the burden of complying with tax qualification rules without getting
Government plans allow tax-free benefits to police and firefighters who are
killed in the line of duty and provide for the early retirement of public
safety workers to encourage them to retire young while they are still able
to pursue other careers.
With government-regulated plans, tribes are able to offer the same good
benefits as state and municipalities, and so are able to compete in
recruiting public safety employees.
Other benefits of government plans include the flexibility to set up
different pension plans for various groups, such as school teachers and
other employees hired by a tribe.
Perhaps one of the most significant benefits is that government pensions
provide secure retirement plans for their employees, unlike some Enronesque
private sector plans that have disappeared under spectacular corporate
corruption scandals, leaving employees without their benefits.
Yoder and Ferrigno initially sought an administrative remedy using
Presidential Executive Order 13175 that was issued by President Clinton and
reaffirmed by President Bush. The order requires federal agencies to
consult with tribes in developing regulatory policies that impact tribes.
"There's a lot of good stuff in that executive order, but nobody uses it,"
The two men then sought and acquired an IRS moratorium on approving further
pension applications until the issue is resolved.
The moratorium, which took effect in January 2004, will be in place until
the legislature acts, said Christie Jacobs, director of the Indian Tribal
Government Office within the IRS.
"We stopped taking the applications for government plans because we have no
clear guidance," Jacobs said.
Although the IRS is not allowed to make recommendations to Congress,
"everybody knows that tribes are governments, but frequently in the law and
tax laws, they are not specifically addressed. The bill will bring clarity
to the statutes so that the language is the same in all places," Jacobs
The finance, labor and tax committees have "marked up" the pension reform
bill with the tribal provision included, Ferrigno said, explaining that
Thomas' Ways and Means Committee is the last stop before the bill moves
forward to a Senate and House vote, conference work and a final vote by
"The good news is we're at a place in the process where 99.9 percent of
legislation never gets to. We're part of a bill that's moving and there's a
lot of interest in getting it enacted," Ferrigno said.
The bill is expected to pass by the end of the year.