Terminating Pre-Approved Plan - Update for Qualification Requirements?

[kmhaab]

I am unclear on whether a pre-approved plan needs to be updated for qualification requirements prior to the plan sponsor terminating the plan.

A favorable Determination Letter was received for the pre-approved plan for the 2nd remedial cycle (addressing the 2010 Cumulative List of Changes).  Does it need to be updated for the 2017 Cumulative List prior to termination?

[Kevin C]

Yes, pre-approved documents need to be up-to-date when you terminate the plan.  If timely interim amendments have been adopted, you may not need an amendment to add new language on termination.  Your document provider should be able to assist you.  Most, if not all of them will have plan termination packages that include an amendment to terminate the plan, including any needed language changes.  Our document provider, ASC, updates their plan termination package each year and during the year as needed.

[Doc Ument]

I point out that other providers may take an entirely different approach, i.e., keeping the termination amendment as generic, permanent, and bare-bones as possible, and using other amendments for each change in law (with advice as to which were needed when).   Don't overlook any discretionary amendments that might be needed upon termination, such as when the employer administratively added Roth deferrals in January and would, as an ongoing plan, have until December (for a calendar-year plan) to adopt the amendment, but, for a terminating plan, that amendment should be adopted on or before the formal date of plan termination.

Note that the IRS correctly points out that compliance with the latest cumulative list does not equate to having a plan that is fully compliant on the date of plan termination.   Pretend that one of the laws passed in December of last year required all ongoing plans to amend by 2020 for a new statutory provision effective for the first plan year beginning in 2018 (I did say "pretend" - but PPA would be a good example of such a fact pattern).   Under this fact pattern, that law will not be included on the 2017 Cumulative List (if for no better reason than that the List would have been published before the law was enacted).  A calendar-year plan terminating in 2018 would need that amendment on or before the date of plan termination.

(For example, PPA amendments might not have been published by document providers until 2009 because Congress allowed ONGOING plans to wait until the end of the 2009 plan year to retroactively amend for all PPA changes, but a plan terminating in 2007 might have been affected by a PPA provision that became effective in 2007, and might therefore have needed an amendment in 2007, even if it did not need, at the time of termination, the eventual full "2009" edition that ongoing plans ultimately adopted in 2009.)

[kmhaab]

Thank you both!