Prototype vs. Volume Submitter "Check the Box"

[austin3515]

We use documents from a major provider. As most of you know the differences between prototypes and the check the box volume submitter documetns have diminished signficiantly now that a) PT's can use cross-testing, and b) VS documents can have TPA initiated regulatory amendments.

So if a) prototype has less flexibility than the vs (i.e., limitations on # of allocation groups), b) the pricincing is essentially the same, then why would anyone opt to use the prototype (other than branding). Or is branding the primary reason? Is there anything a prototype can do that a VS cannot?

[JanetM]

There are still sugnificant differences. VS plan can provide and PT can't provide the following - multiple employer plans, DB plan with EE contributions, governmental plans and non safe harbor hardship criteria.

Am sure there are other reasons but those are the only ones that I can think of now.

[Guest Sieve]

In fact, VS can be branded, so I don't think branding is the issue. Not so long ago, the traditional VS was not prefered by many because there was no adoption agreement which easily identified provisions selected by the employer. Now we have availaibility of VS prototype-style documents, which are virtually identical to the prototype AAs we're familiar with--along with the other "improvements" you mention.

Therefore, I do not see any reason not to convert to a prototype-style VS. (And, IRS is still accepting word-for-word adoptions of EGTRRA pre-approved prototype-style VS documents--such as Corbel--and issuing opinion letters for plan providers.) I think the non-standardized prototype will now go the way of the old standardized prototypes: disappear. I welcome someone more enlightened than I am to educate me on the reasons for a plan provider to remain with a prototype.

Of course, the traditonal VS (without an AA) still is not the document of choice for non-attorneys.

[J Simmons]

Since the Service has made the VS (check the box) so much like the prototype, why does the Service continue them separately rather than merge them into one? Does anyone know what the Service's rationale for keeping them separate is?

[K2retire]

Does the IRS have rationale?

[Jim Chad]

Austin, I can think of one thing that a standardized prototype can do and a VS cannot....at least I think I am right on this.

If you have some employees with less than 500 hours and terminated during the year, they may cause you to fail testing with a volume submitter. but you get a pass on testing with a standardized prototype. Let's the plan has 3% SHNEC and a discretionary profit sharing with last day requirement. Because the terminated employees received the 3% SHNEC, they have to be counted in testing even though they have fewer than 500 hours.

I have been thinking about this. But so far I am still only using the Volume Submitter.

One other thought just crossed my mind. A prototype usually has no "other" boxes to fill in, so it is less dangerous in the hands of the "not expert".

[BG5150]

Does the IRS EVER have rationale?

Fixed

[Bird]

I think for most of the people participating here, VS is the way to go because of the flexibility that it offers. And the check-the-box style VS has the added advantage of being at least somewhat comprehensible to a layman.

But I think in another part of the world, prototypes have an advantage - the sponsor can amend them and just tell the adopting employers that it's been amended, without having to get said adopting employers to take any action. So the turnkey operations, and lower forms of life such as Fidelity that offer free plans in order to capture assets, are able to keep all of their plans qualified for interim amendments by making an amendment and doing a mass mailing.

[austin3515]

Bird -

I think one of the new rules for VS documents is that the sponsor can amend on behalf of its adopters - do you agree? That;'s my recollection from Corbel's EGTRRA Document class.

I have a question though: What if we signed up to sponsor our own prototype, but just use the Corbel-sponsored VS check the box document. Would Corbel be responsible for executing snap-one regulatory update amendments (except that we would obviously need to be distributing copies to our adopters)?

[Bird]

I think one of the new rules for VS documents is that the sponsor can amend on behalf of its adopters - do you agree? That;'s my recollection from Corbel's EGTRRA Document class.

Now that you mention it, something about that sounds vaguely familiar but...I guess I have to say I just don't know.

[Guest Sieve]

VS can now allow the VS sponsor to adopt amendments on behalf of employers, just as in the traditional prototype. Corbel's Basic Plan Document language is identical for prototype & VS-prototype. (I think the traditional VS does not have that language and it has to be added, but I'm not sure.)

Just as with the prototype, Corbel will send out its approved VS-prototype language, then the sponsor of the VS-prototype document adopts the amendment, and then the sponsor informs the employers of the adoption.