Form 8905 for uncertain 401(k) plan

[Guest PBJ]

Please help. I am working with a new client (as of January 2007). They sponsor a 401(k) plan that is currently on an individually designed plan document. In addition, they are a Cycle A filer. The plan appears to be up-to-date through the final 401(k) regulations amendment. We understand that the document should be restated for EGTRRA and sent to the IRS for a determination letter by January 31, 2007.

However, the client is considering moving to a prototype document, but is not sure and would like additional time to make some decisions about the plan, not only prototype versus individually designed, but also design features. How should they proceed?

For instance, if they sign a Form 8905 by the end of January 31, 2007 should they adopt a new EGTRRA document by January 31, 2007 in case they want to be an individually designed plan?

If they sign a Form 8905 in January, then in March (for example) can they change their mind and remain an individually designed plan and submit for a D.L. even though it is now Cycle B? What are the consequences of off-cycle filing?

Any guidance would be greatly appreciated. Thank you!

[J Simmons]

the client is considering moving to a prototype document, but is not sure and would like additional time to make some decisions about the plan, not only prototype versus individually designed, but also design features. How should they proceed?

Sounds like the client doesn't yet have the requisite INTENT to adopt a pre-approved plan to accomplish the necessary EGTRRA restatement. Consequently, I don't think the Form 8905 can buy them more time to weigh the decision. They should do the individual restatement by 1/31/2007.

[austin3515]

http://www.relius.net/news/technicalupdate...?ID=345&T=P

See the last paragraph of this notice from Corbel.

[J Simmons]

http://www.relius.net/news/technicalupdate...?ID=345&T=P

See the last paragraph of this notice from Corbel.

I agree that an employer that signs a Form 8905 can change its mind subsequently and adopt an individually designed plan. However, if an employer that does not at the time of signing a Form 8905 truly intend to adopt a pre-approved plan, signing a Form 8905 would be making a misrepresentation. If the IRS didn't care, then why have the RAP deadlines for individually designed plans at all, or why even have the Form 8905 procedure and not simply assume every plan sponsor would want more time?

[austin3515]

Of course they intended to adopt the pre-approved plan