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IRS Looking for a GUST Restatement


austin3515

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They just asked for it out of the blue. Audit went fine and then on review the "manager" said "wait a minute, this has been to easy for this law abiding tax paying citizen - we need to make them fear the big bad IRS."

That's my theory anyway, I don't have any proof...

Austin Powers, CPA, QPA, ERPA

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Is there a distinction between data and plan documents? Purging official (albeit superseded) plan documents after 7 years seems a bit riskier than purging individual account information after 7 years. Were there any restatements since the GUST document other than the EGTRRA?

Did the EGTRRA restatement receive a favorable determination letter? Why are they reaching so far back?

Always check with your actuary first!

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Is there a distinction between data and plan documents? Purging official (albeit superseded) plan documents after 7 years seems a bit riskier than purging individual account information after 7 years. Were there any restatements since the GUST document other than the EGTRRA?

What's done is done, and I can't say I blame them for purging it. And we're talking about a small medical practice here... It was a PT document, and the plan has been restate a few times including for EGTRRA. But we did not apply for a Determination letter (which apparently the IRS thinks is ok since they banned the practice).

Austin Powers, CPA, QPA, ERPA

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My real question is that now they are asking for it, we don't have it, so what will happen? I have heard of them digging for this stuff before for no apparent reason. About 10 years ago some asked me for a TRA 86 amendment.

Believe me, the audit was squeaky clean. Nothing at all came up. This was an afterthought.

Austin Powers, CPA, QPA, ERPA

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ERISA section 107

Every person subject to a requirement to file any report or to certify any information therefor under this subchapter or who would be subject to such a requirement but for an exemption or simplified reporting requirement under section 1024(a)(2) or (3) of this title shall maintain records on the matters of which disclosure is required which will provide in sufficient detail the necessary basic information and data from which the documents thus required may be verified, explained, or clarified, and checked for accuracy and completeness, and shall include vouchers, worksheets, receipts, and applicable resolutions, and shall keep such records available for examination for a period of not less than six years after the filing date of the documents based on the information which they contain, or six years after the date on which such documents would have been filed but for an exemption or simplified reporting requirement under section 1024(a)(2) or (3) of this title.

I think that the work papers and source information for f5500 reporting only needs to be kept for 6 years after this purpose.

ERISA section 209

(a)

(1) Except as provided by paragraph (2) every employer shall, in accordance with such regulations as the Secretary may prescribe, maintain records with respect to each of his employees sufficient to determine the benefits due or which may become due to such employees. The plan administrator shall make a report, in such manner and at such time as may be provided in regulations prescribed by the Secretary, to each employee who is a participant under the plan and who—
(A) requests such report, in such manner and at such time as may be provided in such regulations,
(B) terminates his service with the employer, or
© has a 1-year break in service (as defined in section 1053(b)(3)(A) of this title).
The employer shall furnish to the plan administrator the information necessary for the administrator to make the reports required by the preceding sentence. Not more than one report shall be required under subparagraph (A) in any 12-month period. Not more than one report shall be required under subparagraph © with respect to consecutive 1-year breaks in service. The report required under this paragraph shall be in the same form, and contain the same information, as periodic benefit statements under section 1025(a) of this title.
(2) If more than one employer adopts a plan, each such employer shall furnish to the plan administrator the information necessary for the administrator to maintain the records, and make the reports, required by paragraph (1). Such administrator shall maintain the records, and make the reports, required by paragraph (1).
(b) If any person who is required, under subsection (a) of this section, to furnish information or maintain records for any plan year fails to comply with such requirement, he shall pay to the Secretary a civil penalty of $10 for each employee with respect to whom such failure occurs, unless it is shown that such failure is due to reasonable cause.

If you are purging (albeit after 6 years) plan documents, like the GUST restatement, how do you prove the benefits to which the employee is entitled?

John Simmons

johnsimmonslaw@gmail.com

Note to Readers: For you, I'm a stranger posting on a bulletin board. Posts here should not be given the same weight as personalized advice from a professional who knows or can learn all the facts of your situation.

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yes, but what will happen? Will they cuff the client and drag him away? Send him a letter saying he was a bad boy but do better in the future? Fine him $25,000??

I'm willing to concede that he should have kept the documents :)

They could take the position that there's a document failure, and propose a CAP resolution. Last time I dealt with that situation (2003), the CAP fee was $3,000 per plan (client had two plans).

John Simmons

johnsimmonslaw@gmail.com

Note to Readers: For you, I'm a stranger posting on a bulletin board. Posts here should not be given the same weight as personalized advice from a professional who knows or can learn all the facts of your situation.

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"IF he has to cough up $3,000 (plus attorneys fees) for not finding a document that is 12 years old, I will be advising that he calls his senator!!"

Senators cost a lot more than $3,000....

Sorry - couldn't resist.

First, my experience is that they ALWAYS ask for the prior document - so I'm surprised this was an "afterthought."

Second, I have had "some" success in showing through other means that the document existed and was valid (a determination letter helps, corporate resolutions, ancillary documents (SPDs, etc.), emails and other correspondence...). It doesn't "eliminate" the problems, but may lessen the impact (penalty).

Third, reminds us that when bringing in a new client, we should have on our "checklist" prior documents, prior service providers, and their policies on document retention. Better to solve the problem (if possible) at that honeymoon stage of the relationship....

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Ask company attorney and/or accountant if they have a copy?

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

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"$5,000 and $10,000 for not having a GUST document that was 12 years old??? The humanity!"

It's all about revenue generation.... Didn't you know the IRS and DOL are "profit centers"?

Continuity of "qualified" documents is a requirement for the plan to remain qualified currently. Problems in the past continue to the present.

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Do you seriously think that more than half of plan sponsors could produce a document more than 10 years old? I don't know where I put my 1040 from 2013!! Does this not smack of "looking for trouble where you know you'll find it just for the sake of causing trouble (and yes "profits")? Picking the low hanging fruit, or fishing in a goldfish bowl with a friggin net?

Austin Powers, CPA, QPA, ERPA

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You know, businesses have to retain documents for ALL kinds of purposes. If they don't/can't, well, frankly, maybe they shouldn't be in business.... In the DB context, plan sponsors have been retaining records for DECADES - just so they can calculate the benefit when due. Most "good" service providers will retain the documents as a convenience to their clients - but that isn't an excuse for the client not to save copies as well. If they don't, then that, in my humble opinion, would be a reason to find another service provider. Most "good" service providers will check with the client/former client BEFORE they purge documents (because, guess what - they don't actually "own" them). "Good" service providers will ask for them when they bring on a new client, because, gee - if you are operating the plan, you want to make sure it's done right, and history can have a bearing on that (and many, many times, current documents have an inadvertent change from a prior document, and the plan is operated inconsistently with the "current" document, but consistently with the prior document). I work with a couple of accounting/plan auditing firms providing a "pre-audit" audit (an audit before the DOL or IRS comes in). Number 1 on the checklist is current, complete, executed documents. Number 2 is historical document (complete, executed) back as far as possible. If they can't find or produce docs back to GUST, we start contacting ALL current and prior service providers to find them - and then prepare the client for what could happen if the plan is audited by the DOL or IRS. Fore warned is fore armed.

Scanning, filing, backing up, storing and the like are very, very, common business practices and have been for many years. Not doing so just isn't an "excuse" anymore.

Heck, I'm a sole practitioner working from a home based office, and I have a NeatDesk scanner and software and about 8 terabytes of storage/backup, plus cloud backup services for my and my client's documents. Total cost, less than a grand - and when I need more storage, I just add another NAS storage unit....

I really don't think it's an onerous requirement to have to maintain files of operative plan documents back to the preceding restated document....

p.s. I have every tax return I ever filed - both as a pdf, and as a TurboTax file (ever since I've been using that software (quite some time))....

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"You know, businesses have to retain documents for ALL kinds of purposes. If they don't/can't, well, frankly, maybe they shouldn't be in business.... "

Are you referring to Fortune 500 companies? Businesses with 1,000 employees? Perhaps that's why it seems like we're on two different planets. I don't think it is even remotely fair to tell a very successful CPA (with 5 or 6 employees) that he should not be in business because he cannot find 20 pieces of paper stapled together that is over a decade old.

[i should confess I was exaggerating about my tax returns; I have them all for quite a few years, most certainly the one I filed 3 months ago, and I have taken to scanning everything in and saving pdfs, which I have for the last 3 years].

Austin Powers, CPA, QPA, ERPA

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Any business has record retention requirements. It matters NOT how large or small it is. Gee. My mom was an antique dealer - and she had to maintain records of 1) purchase cost; 2) sales cost (the difference between one and two being gross revenue for tax purposes - and sometimes the difference between purchase and sale could be YEARS. Indeed, she's been dead for 8 years now, and my brother and I have her remaining inventory, and I could tell you exactly WHEN and for HOW MUCH she paid for each item - some being bought in the late 1970's)); 3) taxable and non-taxable sales (sales to other dealers being non-sales taxable); 4) other expenses (including mileage for travel to buy or sell her inventory); and 5) every sales tax "license" for each state she ever sold anything in (she used to do antique shows in 7 different states) - AND be able to produce all of that anytime a regulator requested it (and state sales tax agents ROUTINELY audited people at shows). She owned a computer (a desktop) that was used only for playing Solitaire....

She was a "one woman" business. Not difficult - even for a computer illiterate senior with an accordion file, bound notebook and a pen.

So, YES, I expect EVERY business to retain the relevant documents for their business - and that includes historical plan documents....

And by the way, "a successful CPA" with 5 or 6 employees - CHARGED with reviewing other peoples records OUGHT to be able keep his or her own in order.... I'll bet they can find their tax returns and the documents used to create them....

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Out of curiosity, I pulled up the new Form 5310 instructions to refresh my memory on how far back your documents have to go in that scenario. In addition to supplying the current document, there's this:

"Note: If the plan does not have a DL for the preceding RAC (remedial amendment cycle), the plan sponsor must include with this application filing copies of interim and discretionary amendments adopted for the preceding cycle."

This is a change from the old 5310, which made you go back as far as the last DL. It's a small movement, but does at least show some acknowledgement that DLs are becoming a thing of the past for many plans and provides some clues as to what the eventual outer boundaries might be.

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