Establishing new plan for 2010

[retbenser]

Plan sponsor wanted to establish a new Cash Balance plan (CBP) for 2010.

The requirement is that the plan must be "adopted" berfore 12/31/2010.

Since CBP is an individually-desgined plan, the documents have to be submitted to IRS.

Questiosns:

(1) What does "adopted" mean? Does it mean a formal corporate resolution to adopt the plan? Does it mean the doument must be signed before 12/31/2010?

(2) Assuming the plan was "adopted" before 12/31/2010 (as discussed above), will the IRS reject the submission as being "late"? Which Cycle document must be submitted (Cycle E - which ended 1/31/2010, or Cycle A)?

(3) In general, is it still possible to get DL for 2010 with an April 2011 submission date?

Thanks for all responses.

[Effen]

I am not a lawyer, but my understanding is that "Adopted" means they have made a formal decision. Ideally this is demonstrated by a corporate resolution, signed plan document and an opened trust. We tell our new plan clients to make sure they open a trust before year end and deposit at least $1,000. Documents can be backdated and therefore are subject to scrutiny, however it’s hard to argue with a trust statement showing an opened trust before year end.

For me, if they don't show me a signed document for before year end, they don't have a plan.

Regarding IRS submission, there is no requirement that you submit a plan to the IRS. If the plan is individually designed, and you want to submit for a letter, most attorneys I work with just hold it until the proper cycle. No need to submit before you are required.

[John Feldt ERPA CPC QPA]

§1.401-1(a)(2) A qualified pension, profit-sharing, or stock bonus plan is a definite written program and arrangement which is communicated to the employees and which is established and maintained by an employer....

In Rev. Rul. 72-509, it appears to say that a plan is not established until it has been communicated to employees.

"A profit-sharing plan does not qualify under section 401(a) of the Code until communicated to the employees even though it was reduced to writing and approved by the employer in a prior year."

[David MacLennan]

New individually designed plans can be submitted as on cycle applications, as long as the next regular on-cycle deadline based on the last digit of the EIN ends at least 2 years after the off-cycle filing period during which the plan is submitted. You should submit them by the due date (including extensions) of the sponsor's tax return (the regular RAP). See Rev Proc 2007-44. If eligible, I would submit it now rather than wait up to 5 years, or you may get your first DL 7 or 8 years from now as opposed to 1-3 yrs from now.

[tymesup]

§1.401-1(a)(2) A qualified pension, profit-sharing, or stock bonus plan is a definite written program and arrangement which is communicated to the employees and which is established and maintained by an employer....

In Rev. Rul. 72-509, it appears to say that a plan is not established until it has been communicated to employees.

"A profit-sharing plan does not qualify under section 401(a) of the Code until communicated to the employees even though it was reduced to writing and approved by the employer in a prior year."

ERISA 104(b)(1)(B) gives the administrator 120 days "after the plan becomes subject to this part" to issue the Summary Plan Description.