New Comparability, Volume Submitters, and IRS Submissions

[Guest LWilson]

If a New Comparability plan is put together on a Volume Submitter document, does the Plan have to go through the standard IRS submission/determination letter process any more?

Is it dependent on the complexity of the plan? (number of groups, etc.)

[Belgarath]

Hard to generalize on these, because there are so many possibilities. But, assuming you have a fully GUST approved volume submitter document, and you don't deviate from the language, you shouldn't generally have to submit for a new plan. If an existing plan, there are all kinds of possibilities - I would say that in many situations you will still not have to file, but in many you will. I know that's a pretty wishy-washy answer, but the possibilities are nearly endless. Most TPA's I talk to are leaning heavily toward NOT filing - if it is a judgement call, and the conservative approach would be to file, most aren't.

[Guest LWilson]

Thanks.

I know things can get ticklish when you start getting into Cross-Tested design, so I'm sure the outcome will depend on how creative our client decides to get.

[AndyH]

Belgarath, I certainly hope that's not true. I see enough problems with takeover plans. I don't want to start seeing problem ones that never got an FDL!

[Guest merlin]

We use the Corbel/Relius volume submitter documents,and most of our clients fit the vs language. FWIW, we decided to submit all plans for FDLs,except in those instances where there is some kind of problem or deficiency (for which the prior TPA was responsible,of course). But when we submit any non-safe harbor plans we DON'T request a specific approval for the general test.We're comfortable with our calculation methodology,and the reliance on the demographics is only good for the year covered

by the 5307. We don't feel that it's worth the additional user fee.

.

[Fred Payne]

Merlin:

What about in the instance of a brand new cross-tested plan? Would you submit for the FDL?

[mwyatt]

One observation is that the IRS wants to get out of the document reviewing business (not quite as bad as when the DOL said that you no longer had to submit SPDs - reason being that they had no room to store the stuff - but somewhat along those lines;) ). As far as submitting for General Test, the one point to consider is whether the IRS's approval really means anything or not. What they are looking at is what you purport to be the client's data; is this the same thing as an audited test? I don't think so. If you know what you are doing, then you know that the client is passing the General Test each year. I really don't think that the extra cost is worth it as even if you get the letter, have you really proved that you passed the GT that year to an auditor? As an aside, please don't rely on "every three years' or "snapshot" testing for your typical doctor client - hard pressed to say that costs were too onerous to collect data on your MD and the three nurses...

[AndyH]

Couple of comments on this:

1. Yes, I agree about the limited use of the FDL in particular as it pertains to the test, but it's the people who don't know what they're doing that worry me; I wonder if this is now the majority? IRS auditors have been telling us that cross tested plans are now a major focus of their time. I supect there is a reason.

2. Isn't the submission fee waived for a new plan under certain circumstances? Then what is the justification for not submitting?

3. Admittedly there have been changes, but under the self correction programs a current FDL was a requirement for certain programs. Is this now ever true?

[Tom Poje]

very good, you got it Andy, the determination letter is important to have for some of the self correction programs.

rev proc 2002-47

section 4.04

"VCO and the provisions of SCP relating to significant Operational Failures (see section 9) are available for a Qualified Plan only if the plan is the subject of a favorable letter."

[Fred Payne]

Tom, do I read this correct? The IRS seems to be telling us not to submit prototype plans (and volume submitter plans) for FDLs, but for us to do so precludes VCO and some of SCP?

Sounds like "Gotcha!"

[Tom Poje]

I guess one needs to be careful about the terms being bandied about in this question - and maybe I didn't read the question closely enough. I don't handle the plan submissions in our office, so I have a poor excuse.

However, for the self correction programs

an individually designed plan needs the determination letter, a prototype can rely on the opinion letter, a regional prototype on the notification letter.

I think all the plans we use are individually designed, so I immediately think of determination letter without regard to the type of plan.

[Guest merlin]

Tom, if you've got a volume submitter plan that does not deviate from the approved vs language doesn't that also qualify as having a "Favorable Letter" under the definition in section 5.01(4)(a) of 2002-47? If so, this would eliminate Fred's gotcha.

Fred, I would still want the "belt and suspenders" of an FDL on a new cross-tested planeven without IRS blessing on the general test. Old habits die hard.

[R. Butler]

We are submitting determination letter filings on a new comparability profit sharing plan. We are going to request a determination on the ave benefit test and general test. Does anyone have a template for Demo 5 & 6 they would be willing to share? Would it be acceptable to send in the general nondisricmination report Relius creates as my Demo 5 & Demo 6?

[Tom Poje]

And now the latest from the ASPA conference out west:

IRS is now backing off on the idea you do not need a determination letter.

And for voulme submitter, prototypes, etc..

you have to be word for word to rely on the opinion letter.

And this goes beyond just the 'self correction' reason for having a determination letter. The determination letter offers protection in case of bankruptcy.

ASPA indicated they will try to get an article addressing this issue on their website in a few days.

[Guest LWilson]

Thank you Tom. I'm actually quite relieved, honestly. When it comes to compliance, I prefer black and white IRS standards.

[Lynn Campbell]

R. Butler, did you ever find a template for Demo 5 and/or Demo 6? What are you using? Thanks.

[R. Butler]

I really didn't ever come up with a template. I did find a FAQ concerning Schedule Q & Demo 6 on the IRS website. I basically used a format based on those Q&As. The link is below

http://www.irs.gov/retirement/article/0,,id=97007,00.html

I was completing this for a particular plan that decided not to file. Although I did complete the work, I don't know if the IRS would have found my format acceptable.

[BFree]

We have submitted the Relius nondisc test results and had no problem with the IRS interpreting them. We've handwritten Demo 6, etc. at top.