GUST deadline and takeovers through 12/31/2002

[Guest Emiman]

12/31/2002 is approaching fast, which is our GUST deadline based on our prototype sponsor, and our firm is running into potential issues that we would like to head off.

1. All of our clients received material at the beginning of the year regarding GUST, along with an invoice and authorization form for us to begin the process. Naturally, we have a handful whom have not responded to our letters or reminders. Any suggestions for "scare" language other than "failure to amend can result in plan disqualification" - this quote does not affect them. We would like to avoid resignation as well.

2. Just like everyone else, we'll receive new business/takeover plans up until the last week of December. Some will be amended for GUST, others will not. For those that are not amended for GUST and because of the 12/31/2002 deadline, is it possible to provide the plan a Resolution for the Trustee to sign until we are able to provide the client with a GUST document? What are other TPAs doing in this situation? Can a document be sent in 2003 but back date the signature for 2002?

3. Number 2 assumes that the client we take over was using a provider that has reliance from the IRS and is posted on the IRS website. What if the client's prior TPA's document or document sponsor is NOT on the list and has not receive reliance? Is a correction program the only option?

[Lynn Campbell]

As far as convincing the client to amend the Plan, I suppose they are not going to be swayed by technical terms such as disqualification. I would just tell them that these amendments are REQUIRED, in the same way that Form 5500 is required... In my mind there is no opting out of this amendment process and I would not give the client the impression that they have any choice (except to go to another provider for the amendment).

[Gilmore]

We have been sending reminders throughout the year. Our last reminder was sent the beginning of October with "Final Reminder" in big bold letters across the top. In addition to plan disqualification we also described the fines that were put in place for those plans that missed their February 28th deadline. This last letter got us in most of the stragglers.

And with the smallness of the pension world I would much rather lose a client than be known as a firm that will tolerate anything being backdated.

[Guest Emiman]

Gilmore,

I agree, backdating is not a practice we adhere to in our office. However, in the pension world sales up to the last week of the year for 2002 is not only inevitable but high volume for our firm.

I did not attend this year's ASPA conference, but I have heard from an associate who did attend that the IRS may extend the GUST deadline from 12/31/2002 to 12/31/2003 - which would solve my dilemma. However, this was not a formal announcement by the IRS. Guess we'll wait and see what happens.

[Jean]

Also mentioned as ASPA conference -- if the GUST deadline is extended, the EGTRRA good faith amendment adoption deadline is not. That will still be 12/31/02.

In the IRS Q&A handout:

Q: Employer X is an adopting employer of an M&P plan. The deadline for Employer X to adopt the GUST document was December 31, 2002. The actual date of adoption is January 15, 2003. What, if any, self correction action may this client take?

A: VCP program with sanctions.

Q: What would be the appropriate action that the M&P sponsor should take regarding Employer X?

A: No action need be taken by the M&P sponsor.