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When do governmental plans need to be submitted for DL


Flyboyjohn

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Governmental plans are cycle C. But wait - read on! During this 5-year cycle, similar to the last 5-year cycle, the IRS is allowing governmental employers to elect to file under cycle E again, allowing this due to something about the phased retirement regs I think.

With that in mind, knowing your gov plan is already an individually drafted plan, let's look at the 6-year pre-approved document cycle. Wouldn't it be nice if your gov document could be on a pre-approved document? Well, under the pre-approved 6-year cycle we are in now, the IRS is reviewing pre-approved governmental documents. The next 2-year window for restating pre-approved DC plan documents is opening up sometime maybe around March 31, 2014 and gov pre-approved plan documents should be available at that time.

So, if your governmental plan might fit into a pre-approved plan document, then by electing cycle E, perhaps you could consider electing into the 6-year cycle and avoid the expense of an IDP altogther and its submission costs? Just have a pre-approved governmental document instead? This certainly won't work for everyone, but it may be worth looking into.

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  • 2 weeks later...

Just to clarify, the period to submit Mass Submitter defined contribution plans was February 1, 2011 through October 31, 2011. The period to submit Non-Mass Submitter Sponsors and Practitioners, Word-for-Word Identical Adopters, and M&P Minor Modifier Placeholder Applications for defined contribution plans was February 1, 2011 through January 31, 2012. For defined benefit plans, the relevant dates are February 1, 2013 through October 31, 2013 (Mass Submitter) and February 1, 2013 through January 31, 2014 (everyone else). Rev. Proc. 2007-44.

Employee benefits legal resource site

The opinions of my postings are my own and do not necessarily represent my law firm's position, strategies, or opinions. The contents of my postings are offered for informational purposes only and should not be construed as legal advice. A visit to this board or an exchange of information through this board does not create an attorney-client relationship. You should consult directly with an attorney for individual advice regarding your particular situation. I am not your lawyer under any circumstances.

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Yeah, on the OP's question, if you want an individual determination letter, you can use either Cycle C or Cycle E. Here's the link. If you want to switch to a preapproved plan, you'll need to look at what type of plan you've got (defined contribution or defined benefit) to determine when you need to do something.

Employee benefits legal resource site

The opinions of my postings are my own and do not necessarily represent my law firm's position, strategies, or opinions. The contents of my postings are offered for informational purposes only and should not be construed as legal advice. A visit to this board or an exchange of information through this board does not create an attorney-client relationship. You should consult directly with an attorney for individual advice regarding your particular situation. I am not your lawyer under any circumstances.

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  • 11 months later...

I have been a Trustee on a Board for a local unit of government's Defined Benefit Plan and we have never submitted the Plan Document to the IRS for a Determination Letter. Every time I bring it up, I get nowhere.

Are we required to submit the Plan Document to the IRS for review?

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That’s right – employers are not required to obtain IRS approval of their plan’s written language.

Obtaining an IRS determination letter provides the employer with the assurance that the plan's written language is currently in compliance.

In Revenue Procedure 2012-13 (see sections 4.03 and 4.10), the IRS indicates a plan may be required to have or to obtain a determination letter in order to fix certain errors. If a significant operational error occurs, the option to self-correct under Revenue Procedure 2012-13 is not available if the plan does not have a determination letter (an exception currently applies for 403(b) plans).

Another benefit of having an IRS determination letter occurs when the plan gets audited by the IRS. The tax-qualified status of the plan requires the plan to operate in accordance with the terms of the written plan and in accordance with current law. The written plan must comply with the requirements of the Internal Revenue Code and applicable regulations/guidance.

That makes two broad areas where the IRS can target their audit: 1) the plan’s operation and 2) the plan’s written language. If the plan has a determination letter, half of the target is protected, making a smaller target zone for the IRS agent, assuming all good-faith amendments are up-to-date.

If the plan operates according to the law/regs/guidance but it has no determination letter, an IRS auditor can read any portion of the written plan to look for a failure. They have a checklist to help them to look for omitted language and for impermissible provisions. When found, the IRS can sanction the employer under audit cap, which is generally an unpleasantly high fee, usually much more than the cost to apply for a determination letter.

That said, your question is about a governmental plan. The IRS is a governmental agency, so if they audit a governmental plan, I’m not sure they would be as strict as they are with a private sector plan, but this is only my take on it and this comment should be considered anecdotal at best.

FWIW, I hope that helps.

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