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GUST certification


Guest dudehead

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Guest dudehead

Just because an employer signs a certification to extend the GUST remedial period, are they obligated to use the document specified or can they use it to adopt another document? Any IRS notices, announcements or rev proc's to back up? Thanks.

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Guest Therese

Are they staying with the same prototype sponsor? See Rev Proc 2000-20, sec. 19.05 & 19.06.

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Guest dudehead

The situation is they currently have a plan sponsored by XYZ Company. But the TPA they are currently with uses ABC Company. So they signed a certification to extend past Feb 28. Now, they are in the process of switching TPA's and the assets. The new TPA uses a plan sponsored by RST Company. Can the certification signed with the ABC Company intent be used when the RST Company plan is submitted for determination letter?

I'm looking for any IRS guidence on this situation. I would think this situation is more common than one might think with the way plans seem to move around.

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They can use it to adopt another document. 2000-20 is pretty clear on this. Paul Schultz (head of the IRS documentation program) has confirmed this on tape at virtually every ASPA conference for the past two years.

The certification extends the deadline for the individual plan sponsor that signs the certification. The extension is defined with reference to the prototype/volume sumbitter on that certification.

In your example, we first look to the ABC Company to see when their "deadline" is. This is the end of the month that is 12 months after the date that the LAST letter was issued by the IRS, but not earlier than 12/31/2002. Let's say the last letter the got approved was for their Defined Benefit plan and the approval came through 1/30/2002 (as did mine).

In this case the certification extends the deadline for your client to adopt a plan until 1/31/2003.

They can adopt ANY plan and they will be ok. That can be a plan of RST Company, or they can go out and have an individually designed plan prepared by a lawyer. It doesn't matter.

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  • 3 months later...

I'm unsure about a sentence in Rev Proc 2000-20.

Section 19.04, last sentence says;

"Within this period, the employer must amend or restate its plan by adopting the GUST-approved M&P or volume submitter specimen plan (or another GUST-approved M&P or volume submitter specimen plan, or individually designed GUST amendments) and, if required for reliance, request a determination letter."

This seems to be saying that if the document adopted must submit for reliance, then you must submit in order to get the period of extension. If you don't submit a modified VS plan, then not only do you not have reliance, but also don't get the period of extension that you thought you had.

I'm I reading this correctly? I hope not.

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I'm not sure why you are bothered by the language you cite. If the adoption is not "pre-certified" (which is interpreted by me to mean a mass-submitter plan, such as a prototype or a word-for-word adoption of a volume submitter plan) then I would expect the IRS to require submission. That is definitely the way it worked for TRA.

What is it about this that bothers you?

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Does this relieve your concerns? From Announcement 2001-77:

"E. Change to Conditions for Extended Remedial Amendment Period

The GUST remedial amendment period generally ends on the last day of the first plan year beginning on or after January 1, 2001. However, certain plans may be eligible for an extended remedial amendment period under the provisions of section 19 of Rev. Proc. 2000-20. Section 19.04 of Rev. Proc. 2000-20 requires plans eligible for the extension to request a determination letter by the end of the extended period if a determination letter is required for reliance. Thus, current procedures would require adopting employers of nonstandardized M&P plans and volume submitter plans to request determination letters within the extended period.

An employer eligible for reliance without a determination letter, as described in this section, is not required to request a determination letter to be entitled to the extension of the remedial amendment period under section 19 of Rev. Proc. 2000-20, provided that the employer adopts the GUST-approved M&P or specimen plan within the extended remedial amendment period. "

Then again, this may only verify the fact that a plan adopted that is not entitled to reliance must be submitted.

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According to an IRS lawyer I spoke to today the rules for M & P plans adopting Gust amendments are as follows:

1. If the employer has adopted an existing M & P plan and intends to use the same plan after it is amended for Gust then the employer does not have to do anything by the end of the remedial amendment period. The employer must adopt the Gust amendments by the end of the period prescribed for the M & P plan-- the later of Dec 31, 2002 or 12 months after the IRS approves the Gust amendments.

2. If the employer wanted to adopt another M or P plan, then by the end of of the remedial amendment period, the employer had to either certify that the employer would adopt a Gust amended plan of a new sponsor or adopt an existing M or p plan of the new sponsor.

3. If the employer adopted an existing M or P plan and then wants to switch to another M & P plan after the remedial amendment period expires, the employer must adopt the gust amendments to the plan that it adopted before switching to another M or P plan.

4.If the employer used the certification procedure, then the employer could, after the expiration of the remedial amendment period, adopt an M or P plan of another prototype or master plan sponsor, an individually designed plan or a VS plan.

5. It is my understanding that the IRS no longer requires most employers who adopt nonstandardized plans to submit the plan for a determination letter. The employer can rely on the determinaton letter received by the sponsor in most cases.

Also I dont know how an employer can submit a nonstandardized M Or P plan which has not been revised for gust to the IRS to preserve the remedial amendment period.

mjb

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mbozek: I think somebody is confused! First of all, Richard's concerns are about plans which do not enjoy automatic reliance, so the entire discusion of when a plan must submit seems to be a bit of a different subject.

It appears that you are drawing a distinction between what you call the end of the remedial amendment period (a time which you don't define but which I imagine you mean the later of 2/28/02 or the end of the plan year that began in 2001) and a date you don't define, which is the later of the 12/31/2002 or the date that is the end of the month following the approval of the mass submitter's *last* document to be approved.

I consider the later of the two dates, as applicable for a plan, to be the date that defines a plan's extended remedial amendment period. A plan is entitled to an extended remedial amendment period if its pre-GUST document is an approved mass-submitter plan (prototype or volume sumitter) OR if it executes a certification by the end of its unextended remedial amendment period (your first date).

With that said, I would change the wording slightly for number 1 so that it reads:

1. If the employer has adopted an existing mass submitter plan (either an M & P or a volume sumitter) and intends to use the same plan after it is amended for Gust then the employer does not have to do anything until the end of its extended remedial amendment period. The employer must adopt the Gust amendments by the end of the period prescribed for the mass submitter plan-- the later of Dec 31, 2002 or the end of the month that is 12 months after the IRS approves the last Gust amendments of any plan submitted by the mass submitter before 12/31/2000.

I agree with 2 if you substitute "mass submitter" for M & P.

I disagree with 3. A plan sponsor enjoys the extended remedial amendment period of the mass submitter plan it adopted pre-GUST wihtout any action on its part. In the case you mention, the employer must adopt the plan of the alternate mass submitter before the extended remedial amendment period applicable to the pre-GUST mass submitter.

WIth respect to 4, again, the employer enjoys the extended remedial amendment period associated with its pre-GUST document without any further action on its part. Hence, if an employer adopts any plan before its extended remedial amendment period such as an individually designed plan, it is a timely amendment. That is, if an employer is currently using a plan of Mass Submitter A and Mass Submitter A's extended remedial amendment period ends on June 30, 2003, then the employer has until June 30, 2003 to adopt its GUST amendments and there is no restriction as to whether the employer must use Mass Submitter A's document. It can use Mass Submitter B's document or adopt an individually designed plan. So, you don't need to use the certification procedure to get the advantage of the certification, as long as the plan in place has its own mass submitter status with the IRS. The certification can be used to extend the date, however. For example, if the plan sponsor is on a document with Mass Submitter A and the extended remedial amendment period for the employer would have been February 28, 2003 in the absence of a certification executed on or before 2/28/2002, if that empolyer adopted a certification with Mass Submitter B on or before 2/28/2002 then that plan sponsor would enjoy the extended reliance period associated with Mass Submitter B, which could be later, such as June 30, 2003.

With respect to number 5, any plan which is a word-for-word adoption of a Mass Submitter plan automatically gets reliance upon execution. In the case of a non-volume sumbitter plan there is no such thing as anything other than word-for-word adoptions. In the volume submitter arena, it is up to the mass submitter itself to issue a letter to the plan sponsor indicating whether or not the adoption is a word-for-word adoption. If it is, then the employer has reliance. If it isn't, then no automatic reliance is granted.

Finally, was this comment in response to anything in particular, as I admit that I don't understand it in the context of this discussion:

Also I dont know how an employer can submit a nonstandardized M Or P plan which has not been revised for gust to the IRS to preserve the remedial amendment period.
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  • 3 weeks later...
Guest Libby

I'm certainly confused.

I agree with Mike's first post - if you have the certification (or if you have adopted anyone's prototype plan), you have the extended remedial amendment period - period. You don't have to stick with the same prototype, the same sponsor, or a prototype plan at all - you could go with an individually designed plan and still get the extended period.

You don't have to send in the plan to get the extended due date. But if you don't, you might have a risk that you didn't get the amendment right. By sending in the plan to the IRS by the end of the remedial amendment period, you get a "further" extension of the remedial amendment period to make any changes required by the IRS. Of course if you've adopted an approved GUST prototype, the IRS now says you don't have to send it in - provided you haven't gone "outside the boxes."

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OK, here's my situation.

Client previosly adopted ABC company's volume submitter and received a determination letter 6/96. Client "certifies" by 2/28/02 that he will adopt plan of XYZ Co.

Client intends to adopt XYZ's volume submitter, with minor changes, without submitting for determination letter. We realize that there will be no automatic reliance.

Assume ABC's deadline is 2/17/03 and XYZ's deadline is 6/20/03.

1. Under this situation, what is the latest that the GUST restatement will be considered to be timely?

2/17/03, 6/20/03, or 2/28/02?

2. Also, assume same data, but Client adopts ABC's VS document on 01/01/00 and has not previously submitted for a letter. Does that change your answer?

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The deadlines are based on the last day of the month. Hence, the answer in both cases is 6/30/2003, assuming that the plan of XYZ was timely submitted to the IRS by XYZ on or before 12/31/2000. I assume it was, because otherwise signing the certificate was not particularly useful.

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  • 2 weeks later...

If the client adopted XYZ's VS with modifications, then don't we have an IDP which must have been restated by 2/28/02? In order to be entitled to the extension of time to restate, I thought that they had to be a word for word adopter?.?

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Modifying a volume submitter does not automatically make it an individually designed plan. Otherwise, why would you be able to submit a volume submitter document to the IRS, pay only the $125 fee and just need to provide a listing of modifications to the volume submitter document?

If that were the case, few plans would be able to meet the criteria for word-for-word adoption.

"What's in the big salad?"

"Big lettuce, big carrots, tomatoes like volleyballs."

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Slight clarification. If the plan was entitled to the extension, then the extension is valid for any plan adopted by the employer by the deadline. Any plan. Even an individually designed plan.

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  • 3 weeks later...

I'd like to pose a slightly different set of facts, where the employer sponsor made no certification by 2/28/02 but had a pre-GUST prototype in place prior to that date.

Specifically, Employer A adopts the standardized prototype plan of XYZ Co. in 1994 (let's assume that plan had all TRA '86, etc. approvals at the time of adoption by Employer A). The plan year ends 12/31 each year. 2/28/02 comes and goes and Employer A has neither restated for GUST nor executed a certification with any prototype or VS sponsor (including XYZ Co.) that it will adopt their plan by the end of the extended remedial amendment period.

If I understand the IRS guidance and the discussion in this thread correctly, I would conclude:

1. The fact that Employer A had a pre-GUST prototype in place prior to 2/28/02 results in an extended remedial amendment period that ends no earlier than 12/31/02 (in other words, a certification by 2/28/02 wasn't necessary to have an extended remedial amendment period);

2. Employer A can adopt a GUST restatement within the extended remedial amendment period using any form of document it wishes: XYZ Co.'s prototype, any other sponsor's prototype, any other sponsor's Volume Submitter plan, or an individually designed plan;

3. The actual remedial amendment period end date that applies to Employer A is driven off of when XYZ Co. obtains a favorable opinion from the IRS (assuming timely submission by XYZ Co.), even if Employer A does not adopt XYZ Co.'s GUST-compliant prototype (namely, the later of 12/31/02 or the end of the month that is 12 months after the date the last letter is issued to XYZ Co. by the IRS).

Am I on track with each of these conclusions? Thanks for your input!

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  • 1 month later...

question - if an employer is using an individually designed plan with a 9/30/02 year end (end of its remedial amendment period) and it decides it is going to adopt a prototype instead, what is the deadline for adopting the certification? i think it can be done by 9/30/02.

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