Effective Date of Cycle 3 Restatement 1 Day After Deadline?

[ERISA1]

I have a client that wants to introduce significant design changes effective August 1, 2022.  This is one day after the deadline to "adopt" Cycle 3 (Post PPA) restatements.  If the document is signed prior to 8/1/22, but effective one day after the adoption deadline, would you have any concern that the restatement is not timely?  I think not, but I will appreciate your thoughts, and hopefully, citations.

The question of Restatement effective dates comes up all the time.  For example, most of us are drafting Cycle 3 restatements with effective dates that are later than the earliest effective date of changes made in the document. For example, a lot of documents are being drafted with 1/1/22 effective dates for laws that took effect in 2018 and earlier.  

Clearly, there is a deadline to sign the document on or before 7/31/22, but does anyone know of a requirement that documents specify earlier effective dates?  It seems the only requirement is to sign  before the end of the Remedial Amendment Period, on 7/31/22.

Thank you very much.

[Belgarath]

2 minutes ago, ERISA1 said:

I have a client that wants to introduce significant design changes effective August 1, 2022. 

No problem at all from my viewpoint. Many documents (Relius, for example) you would just specify the effective dates of those changes in the Appendix.  So you restate 1/1/2022, with one or more provisions in the restated document not taking effective until 8/1/2022, as noted in the Appendix.

[ERISA1]

Thanks! I am trying not to load up the document with a lot of piecemeal effective dates.  You mention 1/1/22 as the main effective date.  Do you think that date is critical in any way?

Ultimately, I can satisfy the client's communication objective by drafting the Summary Plan Description to say it reflects the design as of 8/1/22. Still, I dislike having to specify a bunch of interim effective dates, especially because my (FT William) document does not specify specific effective dates for the many provisions that must take effect before 1/1/22 (or 8/1/22).  (Perhaps you can tell that I am fishing for someone to tell me than an 8/1/22 effective date is OK.)

Thanks

[ERISA1]

I just heard from FT William. They say I should draft the restatement exactly as Belgarath suggests above.

Thanks Belgarath.

[thepensionmaven]

This one seems to be so off the wall, but very imaginative.  One of my clients told me his investment advisor mentioned that deadline to restate his document for Post PPA is August 1st because July 31 is a Sunday.

[Peter Gulia]

Internal Revenue Code of 1986 § 7503 and a tax-law rule interpreting and implementing it state a general rule for adjusting a due date that falls on a Saturday or Sunday, or a legal holiday specified by the rule.

26 C.F.R. § 301.7503-1(a) https://www.ecfr.gov/current/title-26/chapter-I/subchapter-F/part-301/subpart-ECFR94f366dd75fae71/subject-group-ECFRd06c5ed639eb8dd/section-301.7503-1#p-301.7503-1(a).

For example, elsewhere on BenefitsLink I’ve mentioned that this year’s unextended and extended due dates for a Form 5500 report on a plan’s year ended with December 2021 are August 1 and October 17.

I’m unaware of the IRS having published an announcement that the holidays rule applies for a cycle 3 restatement.

And it is unclear whether signing the restatement is the kind of “act” that invokes the holidays rule.

I told my clients to get it done no later than this business week.

But if someone misses, one might argue that August 1 is the last day for the act tax law calls for.

[Jakyasar]

I have attended a few webinars for the restatements and late restatements, latest by Erisapedia. There was absolutely no mention of 7/31 falling on a Sunday i.e. extension to next business day.

 As Peter said, get it done this week. Do not rely on investment advisor unless they provide an official proof for the extension.

[Bill Presson]

2 hours ago, Jakyasar said:

Do not rely on investment advisor unless they provide an official proof for the extension.

Especially this part, bless all their hearts.

[thepensionmaven]

I just received a copy of the signature page to the PPA adoption agreement, and it IS dated 8/1.

Does anyone see a real problem here?

[Bill Presson]

Signature date is different than effective date. To me, it's late.

[Peter Gulia]

Did the plan’s sponsor sign this morning?

Or did the plan’s sponsor sign in July, and an August 1 date refers to when someone processed a document?

Was the signing ink-on-paper? Or was the signature made with a digital-signature service?

If the restatement was not adopted until August and there arises a need to defend against an IRS assertion that the restatement was not timely, consider the legal argument described above.

Even if your client’s IRS examiner might dislike the argument, the circumstances the examiner faces might motivate one not to find fault. Those circumstances might include that the examiner prefers to avoid a delay that would result if the plan’s sponsor requests that the examiner be guided by the advice of the IRS’s Office of Chief Counsel.

I say nothing about what is correct or incorrect, but instead mention ideas a plan’s sponsor or its service provider might evaluate, each with its own lawyer’s advice.

[Jakyasar]

Peter, interesting twists in there.

In my humble opinion (and based on webinars attended)

If signed and dated 8/1, late. If signed on 7/31 but dated 8/1, no idea how one would defend it.

What happens if late? Document is now not a pre-approved document. I want to say not a biggie but again depends on the clients/plan provisions. The good-faith amendments may be an issue with non pre-approved documents.

Erisapedia did a great job last week on the presentation (thank you Ilene and Derrin). They provided a very informative session on this.

 

[Peter Gulia]

I don't suggest that a restatement not done by July 31 is timely. Rather, I mention only that some circumstances might call an advocate to present a face-saving argument. (I would not present the argument without researching it and analyzing it.)