Prototype Documents

[austin3515]

We just took over a plan and the prior tpa sent us a letter saying that the plan document is null and void after termination of services. My understanding is that this is not the case. Can someone point me to somethign in a revenue procedure or whatever that addresses this?

[Belgarath]

"Null and void" seems a little strong. Does the prior plan have any such specific language, or disclaimer? I've seen many IRS approved prototypes that had, on the signature page of the adoption agreement, a statement that the plan will fail to retain its "prototype" status if the fees are not paid. Which makes sense - why would you send updated amendments to someone who didn't pay their fees?

However, I can't point you to a specific regulatory source that addresses this. I'm sure there is one somewhere...

[rcline46]

The prototype sponsor has the responsibility to maintain a list of all adoptors of their plan. When someone terminates services with the prototype sponsor, the sponsor has the right to remove them from their list unless specific actions are taken (that means whatever the sponsor wants) to keep the plan. WIthout a sponsor for the document, it becomes an individually designed plan.

THe prototype sponsor is withing their rights to remove (unsponsor) a document for a particular adoptor.

I believe this is all addressed in the M &P rules in the annual rev proc for determination letters.

[Bird]

Agree, the prior sponsor can't void the document but can discontinue sponsorship and thereby effectively make it an individually designed plan.

[austin3515]

Agree, the prior sponsor can't void the document but can discontinue sponsorship and thereby effectively make it an individually designed plan.

This is what I thought as well... So if we take over a plan, we really should restate it once we take it over, does everyone agree? Without question, if we don't restate it onto ours, we need to have the client sign any amendments.

[movedon]

I've been known to let restating it slide if they're fee-sensitive and don't mind flying without a letter for a few years. But yeah, they need to sign amendments - I can't amend my competitor's prototype on behalf of my new client.

[austin3515]

It happens to be a Corbel document, and Corbel said, and I quote, "there is nothing in the document that would self destruct upon the change in TPA's"

But they did have all the same caveats of course regarding the individually designed status.

[Below Ground]

What I have always understood to be the case is that the sponsor of the prototype no longer sponsors the plan for that firm. Effect is the plan is viewed to be an individually designed plan, which will need amendments to keep up to date as time goes by.

IMHO, when you are talking about a nationally recognized document, this should not be a big deal for the short term. What we do is (1) tell the client about potential concerns, and (2) offer to restate either now or at a future date when an amendment (that is not easily obtained) would be needed. In effect, advise of potential problems and offer an on-going solution. That's about all I can see doing.

Typically, we end up restating the document for a number of reasons (usually to improve design), making the point moot. It is, of course, easier to work with the document that you are most familiar with; BUT we do service plans that don't use our document. We just keep those clients updated on concerns and let them decide.

Anyway, hope my 2 cents helps.