Entity type in Document

[cpc0506]

Document/Adoption Agreement was drafted by prior TPA. It was on a non-standarized 401(k) prototype.

I have two questions:

1. Client comes to us, the new TPA, to administer the plan. I would suggest the plan be restated onto our prototype document. Client wants to wait until the new restatement that will be required in 2014. What does this do to their document? I believe it is now an Individually Designed Plan. Does that mean they need to apply for a determination letter?

2. Adoption Agreement lists the client as an Corporation. Client tells us that their business entity is an PLLC. Should the AA be corrected?

[BG5150]

Why would it become an IDP?

[cpc0506]

The old TPA has told us that they will no longer sponsor the document for a client who has left their service.

[12AX7]

That is perhaps the wrong choice of words from the prior Prototype Sponsor. They can refuse to support the document going forward, but I don't believe they can not sponsor a document that the client has previously adopted. That should not take it out of prototype status.

A number of years ago, prototype sponsors had to annually submit lists of adopters of their plans to the IRS. If an employer was no longer an adopter of the plan, we also had to submit this information as well. This is no longer practiced to my knowledge.

[Belgarath]

Why not just have them sign an 8905 to avoid trouble?

I don't recall the specifics, but it seems like with at least some GUST or maybe TRA 86 documents, that the AA had a statement that the document would only retain prototype status if the employer was paying the document provider a fee, and if they didn't, it ceased to be a prototype. I don't know if that was technically correct even then.

But that raises a question as to the responsibilities of the TPA if a client leaves, or if the TPA terminates the service agreement. I guess I'll have to refresh my memory at some point - I think RP 2005-16 (or an update) covers this. Doesn't seem reasonable that a TPA should have to be responsible for providing amendments, but that may possibly be the "default" under the Revenue Procedure if the engagement letter doesn't specify.

[shERPA]

As a NS prototype, the plan is on the 6 year cycle for amendment and restatement. Doesn't anything that happens now automatically fall into the remedial amendment period for the current cycle?

See Rev. Proc. 2007-44 which says something to the effect that a remedial amendment period with respect to a plan that would otherwise expire before the end of the plan’s current 5- or 6-year cycle (and after the end of the plan’s preceding cycle) is extended to the end of the plan’s current cycle.

[cpc0506]

Let me ask the question another way.

The client has a non-standardized prototype plan that is on the Sungard Corbel platform, which is the same document platform we use.

The client does not want to restate the document until the next required restatement period.

In the meantime, if the client wants to amend the plan for any reason, or if there are interim amendments that need to be adopted, can we make these changes since the document platforms are the same?

[Bird]

I think there is still a distinction between using a prototype and using a prototype that is sponsored. You can do the interim amendments and should be fine (and I have done that and will continue). But I think in a hypertechnical sense, if there is some flaw in the document, you don't have the umbrella of the FDL. (On the other hand, shERPA may be right about the remedial amendment period covering it, but I'm not sure.)

Whatever risk there is is tiny, IMO.

(So have you spent more time thinking about it and talking about it than just re-writing it yet? )