Document Restatement

[jala]

An attorney, working with his widowed client, discovers that the retirement plans, Profit Sharing and Money Purchase Plans, that her husband was a participant in had never been amended or restated since inception, February 1977.

Husband was a doctor and only participant in both plans. Someone else administered the plans for him. This person died, and no one else kept up with the amendments and restatements.

Form 5500 EZ was filed annually by his CPA and is up to date.

Widow would like to roll the balance from the two plans into her IRA.

Should the attorney apply under the VCP to correct and bring the plan into compliance before the balance is rolled over into the widowed spouse's IRA.

Or since it was a single participant plan, is there another means of correction.

I would appreciate in guidance on this issue.

Thank You

[John Feldt ERPA CPC QPA]

I recommend VCP.

[Guest bobolink]

I've done this in the same situation and it flew through. The VCP forms contemplate such an error. Just restate into your current doc and submit. I think there will be more of this as the Professional Corps of the 80's come in for estate planning or die and these plans come out of the files!

The bigger problem is the 5500s, luckily here and in a few of my cases, the forms were up to date. Otherwise - tear stained letter!

[Kevin C]

With no amendments since 1977, it will likely take more than just a current restatement to correct the amendment failures. I don't think you are going to find all of the provisions for GUST, TRA 86, TEFRA/DEFRA/REA ... included in an EGTRRA document. But, VCP is still the way to go.

Here is an excerpt from the transcript of the recent IRS phone forum on EPCRS:

(Next slide) Plan amendment issues.. This is a common issue where let’s say your plan is not

amended for multiple pieces of legislation, for example, GUST and EGTRRA. A lot of times the

question we get is can’t you just adopt an EGTRRA document that’s retroactive for all of the

years in which the plan wasn’t properly updated? The answer to that, even though it causes

inconvenience, is generally no, because if you adopt an EGTRRA document that is retroactive

for years that include years in which GUST was in effect, that document wouldn’t really comply

with qualification rules for the years in which GUST was in effect.

So a lot of times you would have to go through the effort of locating a GUST compliant

document effective for the years in which GUST was in effect, and then have the employer adopt

that and then layer it with an EGTRRA compliant document for years in which the EGTRRA

provisions took effect. If you try to solve the problem with a single document it can be done but

it creates a difficulty where you would have to have multiple provisions, both GUST provisions

and EGTRRA provisions in there, with appropriate effective dates. So that’s something that you

would have to consider.

http://www.irs.gov/pub/irs-tege/epcrs_phon..._transcript.pdf

[Belgarath]

I have heard second-hand, from someone who has had similar situations, that the IRS accepted going back to a TRA '86 document, and didn't require anything further back than that.

And in one other case, where I spoke directly with the employer on a case we never administered, they simply allowed the employer to adopt a current EGTRRA document and then approved the termination.

But I'd certainly go with VCP if someone came to me with this problem.

[Kevin C]

And in one other case, where I spoke directly with the employer on a case we never administered, they simply allowed the employer to adopt a current EGTRRA document and then approved the termination.

Was this one a VCP filing? Or was it discovered on audit or during the 5310 filing? I helped a non-amender (not one of our plans) who was discovered on IRS audit. We only had to do the EGTRRA restatement, but the IRS penalty was $6,500.

[Belgarath]

Hi Kevin - it was during a plan audit, where the plan sponsor was going to terminate the plan anyway in an informal plan termination. Don't know any other details. Client apparently had a nice auditor, and auditor allowed the client to simply adopt an EGTRRA document. That's all I know - client was referred to us by someone else to see if he could get an EGTRRA document.

I sure wouldn't want to count on receiving this type of treament as a general rule!

[Guest bobolink]

The huge fines are the reason VCP is the way to go. We have seen extraordinary large fines for errors such as not adopting an amendment during the period after a contingent determination letter was issued. No negotiation wiggle room. It seems the service sees this as a revenue generator.

[Guest jjren]

We just submitted a VCP for a new client who hadn't touched their document since 1989. We went back to GUST and proposed that we didn't need to re-create a TRA 86 document. We'll see what happens! They can always come back and request older restatements, but it is certainly worth a try to avoid it. Now that they have submitted a VCP, they won't get caught by huge fines.