News & Views

EGTRRA RESTATEMENTS

The general rule is that a qualified plan must be qualified both in form and operation. When a law change occurs, Congress generally provides an extended period of time for an employer to amend its qualified plan for the law change. Congress passed the Economic Growth and Tax Relief and Reconciliation Act (“EGTRRA”) in 2001. EGTRRA contained many provisions related to qualified plans. The IRS established different remedial amendment periods for EGTRRA depending on whether the qualified plan is an individual plan or a plan using a prototype or volume submitter document.

The IRS issued opinion letters covering EGTRRA for volume submitter defined contribution plans and prototype plans on March 31, 2008. Issuance of these opinion letters will begin the final two years of a 6-year amendment cycle. The first two years of the cycle involved the practitioner sponsors, such as Underwood Perkins & Ralston, P.C., preparing amendments to its master documents and submitting them to the IRS. The IRS reviewed these documents the following two years, culminating in the issuance of the opinion letters on March 31st. The final two years of the 6-year cycle is the time during which employers must update their documents for EGTRRA. Employers using the volume submitter documents will be required to adopt the EGTRRA-approved plan document no later than April 30, 2010.

Employers adopting a Volume Submitter document are not required to submit the document to the IRS for an individual determination letter in order to adopt the EGTRRA amendments. However, a determination letter specifically addressed to an employer’s plan can be an important verification of the plan’s qualified status. The IRS will begin accepting applications for determination starting May 1, 2008. The IRS User Fee for a Volume Submitter Application for Determination (Form 5307) is $300.

Some important points to consider:

• Though April 30, 2010, sounds like a long way from now, it will be upon us more quickly than you can imagine. Consider starting the process now to update your clients’ qualified plans for EGTRRA.
• Determination letter applications must include a copy of the plan’s signed and dated timely good faith EGTRRA amendments, interim and other plan amendments. These are in addition to the restated plan. UP&R’s services will include a thorough review of all the plan documents to verify these amendments have been completed. If they have not been completed, we will discuss options to make timely corrections.
• The general effective date for EGTRRA provisions is January 1, 2002. A plan that terminates before the extended amendment date must be updated, at the time of termination, for all law changes that are effective as of the plan’s termination. Thus, if a plan has terminated after January 1, 2002, it must incorporate EGTRRA provisions even though it no longer is in existence as of the current 2-year amendment cycle. UP&R generally has amended plans that have terminated after 2001 as a part of preparing termination resolutions and other termination documentation. However, be certain to check the status of any terminated plans to verify if EGTRRA amendments are required for the plan. Do you have a client that used a prototype plan document, terminated the plan prior to the time the prototype sponsor could offer an EGTRRA restatement, and is now off the prototype sponsor’s mailing list for an EGTRRA restatement?
• Check the status of prototype documents maintained by your clients. Over the years, we have noticed in some takeover situations the prototype sponsor will make the effective date of the prototype document the date it takes over the plan. This may not be the date required for EGTRRA provisions to be effective. For example, assume an investment company takes over a plan effective January 1, 2008, and restates the plan document into the prototype document it sponsors, making the effective date of the restatement January 1, 2008. The investment company uses its EGTRRA document, thus, as of January 1, 2008, the employer’s document is up-to-date. However, what about the years between 2002 and 2008? The sponsor of the prototype document for these years no longer has this employer as a client and likely will not be forwarding an EGTRRA restatement for the years in which it was involved with the plan.
• The restatement process is a good opportunity to verify the entire plan document. Does the employer have the signed plan documents reflecting the initial effective date for the plan? Does the employer have the signed documents for prior law changes, such as GUST?
  

Underwood, Perkins & Ralston, P.C. offers a full range of services related to ERISA-qualified employee benefit plans, including 401(k), profit sharing, money purchase pension and defined benefit pension plans. We sponsor our own volume submitter documents for use by our clients. Please contact us with any questions related to EGTRRA restatements.