Premium Only Plan Documents

[Guest GG]

When do Section 125 Premium Only Plan Documents need to be amended for Treas Reg 1.125-4T?

Also, we would like to start offering Section 125 Premium Only Plan installation and administration service. Does anyone have a source for Plan Documents?

[QDROphile]

You don't need to amend. Treas. Reg. 1.125-4T covers matters that are permissive. Your plan document should be more conservative. Amend when you implement the more liberal standards.

Or have you been using the Treas. Reg. 1.125-4T standards without amending and you are wondering when you need to conform your documents to your practice?

[Guest GG]

Right now we are using the standards and have not amended. When would we need to amend by?

[QDROphile]

I am not aware of any specific guidance or requirement, but I have not made any effort to research other than to check the preamble to the regulations. Unlike section 401, section 125 does not have a built in concept or a tradition of remedial amendment periods. ERISA has a requirment that plans be administered in accordance with their terms. So absent a specific grace period, an argument can be made that the amendment is required in order to change plan standards. But if that is the rule, compliance is uncommon to rare. I would say you are doing well to amend by the end of the plan year in which the change in operation occurs. And the next question is about the summary plan description. Does the deadline for a summary of material modifications run according to when the plan was effectively amended in operation or according to when the plan document was formally amended?

[Dawn Hafner]

See IRS Announcement 98-105. This announcement postponed the effective date for 1.125-4T, which previously was January 1, 1999. The new effective date will be for plan years beginning at least 120 days after further guidance is issued.

If your cafeteria plan only allows changes in elections under the 1.125-2 reg then it should be amended to allow for changes consistent with 1.125-4T, although this will not be required until the new effective date.

Pension Publications of Denver offers an easy to use cafeteria plan document.