No more determination letters...

[austin3515]

I've read a few articles and there is one obvious question that I have not seen answered - will the sponsors be required to restate their documents periodically? I sure hope so as I have dealt with plans written in the 90's with 35 amendments attached (and yes I am exaggerating).

[david rigby]

Required? By whom? For what purpose? In the past, restated documents were to make it easier on IRS reviewers.

Seriously, your desire for a clean document is great, but I foresee that problem getting worse. And more abuse. And more outright discrimination.

Since a DL is never required, those who want to abuse will be (essentially) given a green light to proceed.

[Belgarath]

I'm not sure I'd go quite so far. A plan sponsor whose plan doesn't satisfy the qualification requirements will still be subject to audit and penalty/disqualification. So there's still every incentive to have a plan that satisfies form and operation, just like before. It may just be more difficult, as an individually designed document with a mass of amendments is, at best, confusing, as Austin mentioned in such an entertaining fashion.

At this point, the Announcement 2015-19 is for individually designed plans only. I suspect that the IRS will still want to encourage pre-approved plan documents, and I'd be surprised if they modify that program in any manner that encourages any abuse. But then, what do I know? You know what opinions are like...

[Peter Gulia]

Thinking of non-frozen IRC section 401 plans, what do BenefitsLink mavens guess as the percentages for: plans using only individually-designed documents; plans using a few custom add-ons, but mostly using a preapproved document; and plan using only preapproved documents?

[david rigby]

Also, consider that those who are willing to abuse (some might be eager to abuse, not just "bend" the rules) may now see an incentive to drop the vanilla prototype and use an individually designed plan. The vast majority of these will be below the audit threshold, so there will be less protection for the rank and file employees.

If you think this isn't going to happen, then I might have some south Florida land to sell you.

Future internet searches will find this message as an early warning.

I'm just sayin'.

[Belgarath]

You may be right! I'm in an uncharacteristically benevolent mood right now, so my cynical side (which normally has the upper hand) is temporarily repressed.

As to the south Florida land, I think I already bought that - according to my deed, I apparently own all the land upon which Walt Disney World is built. With that and my stock in "I admire Congress" Buttons Manufacturing Corporation, I can retire in style...

[Carol V. Calhoun]

I don't think individually designed plans can be required to restate periodically. If the documents as a whole (even if they consist of an original plan plus 35 amendments) are qualified, on what possible basis could the IRS require a restatement? It's only weapon would be plan disqualification, and I can't see how that applies.

On the other hand, I would still advise a client to restate periodically. Clients have enough trouble figuring out what their plans say when it's all in one document. If they have to piece together bits of things from a bunch of documents, the probability of correct interpretation goes way down.

[austin3515]

I think the recurring conversation goes something like:

Attorney: You should really restate your document,

Client: OK, sure. How much willt that cost?

Attorney: $__thousand.

Client: Next year's looking a lot better, we'll do it then...

Obviously this client should be on a preapproved plan. Will the attorney tell them that though? Who knows. I wonder if the attorneys will start using the VS check the box document more often or if it is just that contrary to the fiber of their being. I think they have a wonderful incentive to do so - the mandatory restatements for which they can charge. 98% of these documents are not doing anything that can't be done on a good pre-approved document.

Or maybe the good ones will give their favorite TPA's referrals!

[rcline46]

I can't be that old! Somewhere there was a rule that a restatement was required after 5 amendments, new SPD every 10 years, or 5 years if there were amendments. or maybe I've become 'ERISAfied', something akin to petrified?

[K2retire]

Most of the attorneys that we work with are already using prototype or volume submitter documents.

[austin3515]

Most of the attorneys that we work with are already using prototype or volume submitter documents.

What do you mean by volume submitter though? Prototype formatted volume submitter, or just the one that looks like an individually designed document?

Because the attorney documents that I work with are submitted on the 5 year cycle. I suppose that's the big question, will they revert the pre-approved 6 year cycle.

[Peter Gulia]

rcline46, perhaps you're thinking of this bit from ERISA section 104(b): "The administrator shall furnish to each participant, and each beneficiary receiving benefits under the plan, every fifth year after the plan becomes subject to this part an updated summary plan description described in section 102 [that] integrates all plan amendments made within such five-year period[.]" And even if there has been no plan amendment, section 104(b) calls for a republication of the SPD "every tenth year after the plan becomes subject to this part."

The idea of requiring an integrated summary plan description only on a periodic basis might reflect assumptions of a time before word-processing software was in wide business use.

For an ERISA-governed plan, a proliferation of tack-on amendments without restatement (especially if some amendments, instead of revising only the originating document, revise a preceding amendment or some succession of them) arguably might call into question whether the plan is "established and maintained pursuant to a written instrument" as required by the first sentence of ERISA section 402(a).

[mbozek]

As I understand it a qualified plan is a plan has adopted all provisions required for compliance with the rules of IRC 401a . It is not required that the plan receive a favorable determination letter from the IRS although tax advisors routinely submitted individually designed plans to obtain the pro forma determination letter to have if the IRS audited the plan.

So now individually designed plans will no longer be able to obtain a determination letter. Will IRS now audit individually designed plans to see if there is a ding which can result in a revenue gain to the govt?

IRS is eliminating determination process for individual plans to reduce costs because every year congress reduces its budget by 3% as payback for the Lois Lerner fiasco. Attitude of congress is that IRS needs less money each year because more tax returns are filed electronically which requires fewer employees. IRS staff has been reduced by 20% in last 5 years.

[John Feldt ERPA CPC QPA]

rcline46, individually drafted plans that do not seek an IRS Determination letter are not required to restate the document, that has never been required. Only if they seek an IRS determination letter are they required to restate the plan to conform with the applicable cumulative list.

[ETA Consulting LLC]

Keep in mind that it is only a technicality that documents to not require favorable determination letters for qualification. The caveat to that has always been it is prudent to have one. Why? Because, we know that you must have reliance on a DL or Opinion/Advisory Letter in order to qualify for Self-Correction of minor errors.

That opens the possibility that the IRS may audit every individually designed plan. Regardless of the errors that may have been fixed, they would not be eligible for self correction.

Now, if the rules on self-correction were to change where you did not require reliance on a favorable letter, then this issue may not be as drastic. As far as cost reduction, they could've simply raised the filing fee for receiving favorable determination letters instead of making it impossible to get one.

I did enjoy the comments and insight on this topic.

Good Luck!

[Mike Preston]

For an ERISA-governed plan, a proliferation of tack-on amendments without restatement (especially if some amendments, instead of revising only the originating document, revise a preceding amendment or some succession of them) arguably might call into question whether the plan is "established and maintained pursuant to a written instrument" as required by the first sentence of ERISA section 402(a).

Seriously?

[John Feldt ERPA CPC QPA]

Exactly, it's always been: don't let your plans run around out there without any clothes on (the IRS D letter).

Now we'll have to keep our eyes closed when we see those plans.

Edited to say I was replying to ETA.

[Peter Gulia]

I didn't say it's a winning argument, only that I can imagine someone constructing the argument.

[jpod]

My clients always like to work with updated "working copies," with embedded notes about effective dates where helpful, rather than pure and usually confusing restatements. Notwithstanding the caveat we insert on the cover page explaining that the actual plan documents control, etc., we realize that they may be viewed as the 402(a) written instruments referred to by FGC above, but we don't think we have anything to fear in that regard.

[TPApril]

Looking for clarification -

VS plan restated for PPA does not request DL. In 2017 they amend the plan by making changes to PS contribution. Plan becomes IDP. Correct that no DL will be required at that time? Think they should request one at current time even though there is no divergence from the checkboxes?