Determination Letter - Urgent Business Need

[luissaha]

Does anyone have experience requesting an expedited review of a determination letter request due to an "urgent business need"?

I have a client that needs to establish a new 401(k)/ profit sharing plan for collectively bargained employees. Employers are currently contributing to another plan on behalf of these employees, but the other plan is essentially kicking these employees out. We need to set up the new plan to receive new contributions for the employees, and also to transfer the accounts from the other plan.

The problem is that the other plan will not transfer the accounts until the new plan obtains a favorable determination letter. Also, employers are reluctant to make contributions to the new plan until we get the letter. Without the letter, employers will have nowhere to remit contribtuions required under the collective bargaining agreements. Also, fees would by very hugh for participants if we need to maintain 2 plans before obtaining the letter.

Any help would be appreciated.

[My 2 cents]

I am not a 401(k) plan practitioner, but what if you adopt a prototype 401(k) plan? They don't usually go through a determination letter process since they have been pre-approved by the IRS. Would a copy of the master document, the adoption agreement and the approval letter for the master document suffice to satisfy the plan from which the assets are to be transferred? [is this a multiemployer plan? Do such plans get to use pre-approved documents?]

If the plan is treated as qualified by virtue of being a pre-approved document rather than by virtue of having a determination letter, that should be good enough for the employers who are supposed to contribute to the plan.

[luissaha]

Well, the plan is a multiemployer plan. We talked with various 401(k) recordkeepers and apparently there are no prototype 401(k) plans out there. So, you suggestion does not seem to be an option for us.

I'm wondering if in our cover letter to the IRS requesting the letter we explained the situation, would they expedite the review? If not, does anyone have an estimate as to how long it is taking for the IRS to review apllications and issue letters for new plans?

[My 2 cents]

Well, the plan is a multiemployer plan. We talked with various 401(k) recordkeepers and apparently there are no prototype 401(k) plans out there. So, you suggestion does not seem to be an option for us.

I'm wondering if in our cover letter to the IRS requesting the letter we explained the situation, would they expedite the review? If not, does anyone have an estimate as to how long it is taking for the IRS to review apllications and issue letters for new plans?

Noting again that I do not work on 401(k) plans, I thought that a large number of 401(k) providers sponsored or used prototype plans. Did you talk to any of the larger national recordkeepers and/or companies that handle substantial 401(k) assets?

[Slider]

It's my understanding that under Rev Proc 2011-49 a multiemployer plan cannot piggy back on the opinion or advisory letter for a prototype or volume submitter plan.

So the plan may be in a situation where it has to get its own letter unless it could merge with another plan that already has a letter.

[John Feldt ERPA CPC QPA]

A multieemployer plan cannot use a pre-approved document. Explain the issue to the IRS in the 5310 application and see if they accept that as an urgent business need. The best you can do is tell it like it is and hope for the best results. The fastest D Letter I've ever seen is 3 months on a bankruptcy 5310 application. FYI.

[luissaha]

Thanks for the information. Regarding the use of a preapproved document by a muiltiemployer plan, what I am now envisioning is adopting the preappoved plan (a MPPP with no contribution requirement) and trust just to hold that accounts transferred from the other plan. The other plan won't spinout the accounts until we get the favorable determination letter. I could likely convince the employers to contribute to the new 401(k) / profit sharing plan, as long as we've applied for a letter for that plan. Could this work? I think the other plan is being unreasonable requiring to get the letter before the transfer. The applicaiton should suffice.