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Certification of Intent to Adopt


R. Butler
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We are sponsoring a document for the first time. Essentially we are putting our name on a document of a major provider. Although the provider applied for IRS approval prior to 12/31/00, we did not apply until last month. The provider tells me we can still use the Certification specified in Rev. Proc. 2000-20 becuase they applied prior to 12/31/00. The provider says it is irrelevant when we applied for IRS approval.

Is this correct?

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R Butler, I don't think you are getting accurate advice. In order for your clients to use a certification to get the extended amendment period, you as the prototype sponsor (and not the prototype mass submitter) would have to have submitted your name to the IRS by 12/31/00 as an adopter of that prototype. Since you didn't, your clients have only until 2/28/02 unless they sign someone else's certification. One way to check whether your clients will have the extended period is to see if your name appears on the IRS' website as an entity that submitted prior to 12/31/00. That is the list the IRS is going to use in determining whether someone amended timely.

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MR Bernardin,

Thank you for you reply. I was fairly certain that we couldn't rely on the extended certification period, but since the document provider told me otherwise I wanted to double check.

One question, where do you get the 2/28/02 date? I haven't seen that date, I have assumed 12/31/01.

Thanks in advance for your help.

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R.Butler,

Although your employers can't use your document to get the 12 month prototype extension, can they certify their intent to adopt another prototype plan that was filed by 12-30-01 and then adopt your plan within the 12 month extension period?

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Hypothetically we could have the employer certify their intent to adopt another prototype. My reservation for doing the certification under Rev. Proc. 2000-20 is that your expressing an intent to adopt a particular plan under a penalty of perjury. I have difficulty having clients sign a certification that we know beyond any doubt is false. We are looking into somehow modifying the certification.

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RButler--

I share your concern. I would not have a client sign the certification unless there is a bona fide belief that they are going to use the document. Of course if, for some reason things change (costs, confidence in the provider, a change that takes them out of the prototype etc. ) then they can go with another document or an individually designed plan and still have the extended RAP.

From a practical point of view, I suppose it is something that would be "impossible" for the IRS to catch, but having people sign things that they know are false is never a good practice

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The IRS has stated that the certifications don't have to be signed under penalty of perjury this time around, but I understand your concern. However, many employers who are simply changing prototype sponsors or who have had a particular plan be discontinued by a prototype sponsor don't need to certify to get the 12 month extension because they are deemed to have adopted any plan maintained by their former plan sponsor that was filed by 12-31-00.

Assuming a sponsor is entitled to the 12 month extension (certification or automatically), can they then adopt your plan during their extended remedial amendment period and maintain prototype status even though you did not file your plan as a prototype sponsor by 12-31-00? The question I have basically is does the prototype plan that is adopted by the individual employers who need GUST 2 restatements during the 12 month prototype extension have to have been filed with the IRS by 12-31-00, or can it have been filed with the IRS in 2001?

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Alf,

You may have just made my life much easier. I just went back and reviewed again Rev. Proc. 2000-20, §19. I now see clearly the part about prior adopter's. We have several plans in various prototypes. To ease administration and increase revenue we decide to sponsor our own document. Not all, but many of the employer's current document providers, actually did file with the IRS before 12/31/00. Based on §19.05 it appears, just as you stated, that if an employer is merely switching prototype providers they are already deemed to have adopted any plan maintained by the former plan sponser that was filed by 12/31/00. Thus, certifictaion not necessary regardless of the prototype they actually adopt. Am I understanding correctly?

Thanks for your help.

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You are correct. You have the remedial amendment period of the prior protype sponsor without the need for a certification.

The only place where you should have a problem is if the prior sponsor did not have a document in by 12/31/00 or the plan was previously an individually designed plan. You have to know what the extended date is for the prior sponsor (it could be beyond 12/31/02) but if you operate with a 12/31/02 date you should be fine.

I think that many prototype sponsors have sent out the certifications just for "administrative ease." You don't know what the IRS is going to require to establish that you previously adopted a prototype that has the extended remedial amendment period and having the one piece of paper certification makes this "proof" much easier. Also, you have the employer at least "psychologically" locked into using your document.

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Now that we all agree that most of the employers will be eligible for the 12 month extension automatically (w/o certification), can those employers adopt R.Butler's new prototype plan before the 12-31-02, even though it was not filed with the IRS by 12-31-00?

I guess they could adopt anything and be treated as individually designed plans, but can they maintain prototype status by adopting a prototype plan that was not filed by 12-31-00, but was subsquently filed and approved by the IRS?

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I think there are two distinct quesitons--1) Do you have the extended RAP and 2) Is the document you are adopting a prototype. Thus, I think the question of whether the document you are adopting is a prototype has nothing to do with whether that document has the extended RAP.

I guess my question is what happens if they adopt R. Butler's Plan before 2/28/02 so they are not "on" a Plan that has the extended RAP as of the end of individually designed remedial amendment period. If she wants the extended RAP should she be careful not to restate anyone's plan over on to her document until after 2/28?

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After reveiwing Rev. Proc. 2000-20 several times I am satisfied that for RAP purposes, employers are eligible for the extension if they are prior adopters of a protoytype that was timely submitted to the IRS for approval. Similar to the certfication, once an employer has the RAP the Rev. Proc. does not require that the employer actually adopt that prototype. I don't see any reason that the employer can't adopt any prototype, regardless of when filed for IRS approval.

I'm a little confused by K. Johnson's last post. If an employer adopts my plan before 02/28/02, they don't need the extended RAP because it would have adopted timely anyway. Am I missing something?

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RButler

You are right, I was still thinking under the "old rules" and the submission of non-standardized prototypes for a determination letter. In other words, if you put an employer on a non-standardized prototype that did not have the extended RAP in late February you would also have to be sure to get it in for a determination letter by the end of the month. Of course now, there is not that much of a reason to submit a non-standardized prototype.

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