Is a plan amendment ineffective because it lacks a distinct signature for an adopting employer?

[Peter Gulia]

In 2022, a retirement plan’s sponsor asked its recordkeeper to prepare a plan amendment to add, effective January 1, 2023, a business organization the sponsor acquired last summer. Using an IRS-preapproved document’s forms, the recordkeeper sent a restated adoption agreement. In December, the plan sponsor’s chief financial officer signed it. That signature is dated and time-stamped in the recordkeeper’s electronic-signature system.

The trouble? The recordkeeper now says the amendment is ineffective because it lacks a signature on behalf of the adopting employer.

The CFO who signed for the sponsor also is the CFO of the sponsor’s subsidiary and has power to sign for it. I’m guessing there is, or ought to be, no defect.

But I know enough to recognize that I might not know enough about rules or customary processes for using IRS-preapproved documents.

What am I missing?

[MoJo]

Was the adopting employer also required to sign the restated document (i.e. two signatures)?  Was the e-signature not set up to do that?  If not, first, I would "blame" the recordkeeper, and make them fix it (and we usually recommend a VCP filing to get approval for a retroactive amendment to cure).

 

However, being practical as well, did the CFO sign with intent on behalf of both entities?  I'm guessing when asked (prompted) appropriately, the answer is yes, and now it becomes a documentation problem.  Gather the appropriate documentation to prove it, then do a clarifying amendment to make the AA match what the employer already says happened, and move on....

[Peter Gulia]

MoJo, thank you for your help.

The recordkeeper’s system expected two electronic signatures. It is unclear whether the recordkeeper’s system sent (to anyone) a request for the adopting employer’s signature. Also, it is unclear whether the recordkeeper had set any contact for the anticipated adopting employer. The CFO is adamant that she received only the request for the plan sponsor’s signature.

As mentioned, the CFO who signed for the sponsor also is the CFO of the sponsor’s subsidiary and has power to sign for it.

Further, the only change made by the restated adoption agreement is adding the adopting employer.

Without any leading question or suggestion, the CFO confirmed her authority to act for both corporations, and that she knew and intended that she acted for both.

Before I read your helpful note, my advice was about the same as your suggestion. Likewise, I wrote the file memo.

[MoJo]

Good...  Not sure what e-sign service is in use, but when we add a participating employer, we do an "addendum" (not a restatement) and it requires two signatures - and our e-sign process specifies in advance who needs to sign, and routes the document as specified, automatically.  If the same person needs to sign as both, we set it up with signatures in two places, and it can't be complete until both signatures are completed.  If it isn't completed with a period of time, reminders go out, and it's set up with an expiration date - and well before the expiration date, someone is reaching out to find out why the document wasn't complete.

 

Pretty straightforward - and the only problem we had was finishing up cycle 3 restatements (we did about 2200 of 'em) was ONE client who couldn't sign, because he couldn't get internet service or phone service on his skiing trip to the Swiss Alps, and there wan no other authorized signer....  Poor guy.....  😁