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Age-weighted Profit Sharing Plan


Guest AFRICA6796
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Guest AFRICA6796

Since Age weighted profit sharing plans are not permitted to be amended as part of a volume submitter or prototype plan:

What should an employer do, who adopted such a plan from a document provider who did not receive an opinion letter for the plan?

Let’s say an employer , who has his/her age-weighted plan at another custodian, wants to transfer the plan assets to this custodian who does not have an opinion letter for the plan, is completing amendment and restatement documents ( for GUST and EGTRRA) sufficient? There is still no opinion letter.

Lastly, is it true that the IRS has never issued an opinion letter for an age-weighted plan?

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As far as I know if you want to have an age-weighted formula, you need to use a custom document. I understand that some consultants have prototype documents that allow for age-weighted formulas, but having an age-weighted fomula converts the document into a custom document in the eyes of the IRS.

As for your history question, once upon a time I got an IRS determination letter for a volume submitter 401(k)/ profit-sharing document with an age-weighted allocation formula. Apparently I got my letter before the IRS made its policy. The IRS agent told me that I was lucky and the letter was good but refused to issue a letter for a volume submitter profit-sharing plan (with an age-weighted formula) without the 401(k) feature. I am not aware of anyone else ever getting a determination letter for a volume submitter or prototype plan with an age-weighted formula (which doesn't mean that it didn't happen), and my document became obsolete several tax laws ago.

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My understanding from statements attributed to IRS EP persons a few years ago is that the IRS will not provide standardized language for age weighted plans for m-p sponsors because they did not want to encourage the adoption of such plans. The IRS feels that an er who wants to adopt such a plan should pay for the drafting and approval of such documents. Appearently the IRS feels that such plans facilitate the allocation of assets to HCEs.

mjb

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