IRS Approval of Trust Agreement Amendment

[luissaha]

We are working on a "spin-out" of assets from a multiemployer defined contribution plan. The assets from certain union members' accounts will be transfered to a new multiemployer defined contribution plan.

The existing plan is in the process of adopting a trust agreement amendment authorizing the transfer, but they are insisting on sending the amendment to the IRS for approval prior to actually sending the assets to the new plan.

Has anyone ever heard of sumitting such an amendment to the IRS for approval? Will the IRS approve such an amendment? Is there a process for seeking IRS approval for a trust agreement amendment?

Any help would be appreciated.

[QDROphile]

What you are describing is a determination letter.

[luissaha]

Yes, but the plan is proposing to send only the Trust Agreement amendment to the IRS for review and approval, not the entire plan document and trust agrement as you would send for a determination letter. My concern is that if only the amendment is sent the IRS will not review it. The IRS will require them to submit the entire plan document and trust agreement for a determination letter. Also, why would the plan want to submit their own amendment (or their entire plan document and trust agreement) to the IRS for approval as part of the spin out? This does not make any sense to me.

[QDROphile]

All good points. Perhaps there is something for which they are seeking a private letter ruling, but I cannot imagine what that might be.

[luissaha]

Thanks for the help. I'm thinking this is just some sort of delay tactic. They don't want to transfer the assets for some reason, so they want to create some reason to justify why they can't send the money to the new plan. They can say, well, this amendment we passed requires IRS approval, so the accounts can't be sent until that happens.

[Peter Gulia]

If the transferring-out plan is a multiemployer plan, that might involve some concerns that fiduciaries might not have concerning some other kind of plan.

Consider whether it's possible that the trust agreement was the only document in which a change to support the transfer is needed.

[luissaha]

My concern is the perceived need of the transferring-out plan to send the trust agreement amendment to the IRS for approval before sending the assets to the new plan. Essentially, they are asking for a determination letter, which could take a year or more. This would create an unnecessary delay, in my opinion, because there is no reason I can think of why this is needed.