Client Does Not Want to Submit Plan for New Det. Letter

[mal]

Plan fiduciary of a $25m, individually designed money purchase plan does not want to seek an updated Determination Letter. Quoted cost to restate plan is only $5k plus the IRS User Fee, but client believes that cost is not justified because plan is regularly updated. He really thinks that he is doing right thing for participants by saving them money.

What arguments would you use to convince this client otherwise?

[Bird]

Well, if it really needs to be individually designed then I would explain (or would have explained) that the FDL submission/cost is part of that decision. Otherwise, what gives him the basis for believing it is qualified? Updating in and of itself means little, if, e.g., the formula is whacked.

(I don't have any $25M plans but find it hard to connect the adjective "only" with "$5k." Volume submitter documents are so flexible that it's hard to justify the expense of an individually designed plan, at least in my market. But again, it's part of the decision; if they want an individually designed plan that's simply the cost that goes with it. Not that helpful, I know.)

Self-correction is generally easier when you have an FDL.

[mal]

Bird, they do have a current DL. The client would like to opt-out of the DL process for the upcoming cycle.

The Volume submitter documents would not work for this group.

[ETA Consulting LLC]

Self-correction is generally easier when you have an FDL.

Self correction is not available when you don't have one,

I agree with everything else you stated; especially the "only" $5K price.

Good Luck!

[jpod]

If the client has any thoughts about possibly selling the business after his current cycle the lack of a current DL may be a due diligence item which may cost him a whole lot more to address at that time then the $7,500 it would cost now ($5,000 plus $2,500 user fee). I must say, however, that $5,000 seems very high if the plan is already up to date amendment-wise ($5,000 just to plug in the amendments into a new restated document and prepare some IRS paperwork?).

[Peter Gulia]

mal, if the advice your client asked for was to explain what disadvantages might result from the absence of a current determination letter and you have explained the disadvantages, have you fulfilled what your client asked?