Amending another's Plan Doc on same platform

[TPApril]

Plan Document for 401k Plan was created in the name of the now prior TPA.

New TPA uses the same platform/vendor for said Plan Document.

Can Plan Document be amended using existing Plan Document either of the following two conditions:

• New TPA has its documents under its name
• New TPA does not have its documents under its name

Note: Plan Document is going to be amended in full under new TPA, but certain errors in original TPA document need to be corrected retroactively, and trying to determine best approach.

[Bird]

13 hours ago, TPApril said:

Can Plan Document be amended using existing Plan Document either of the following two conditions:

I have to say that I don't understand this, sorry. But yes you can restate it in either scenario. 

My initial thought was that maybe it didn't have to be restated at all (if prior TPA did not sponsor it) but if you need to correct some errors then sure. I'm not sure of the significance of the prior doc being from the same vendor; it's a red herring.

[Paul I]

It would be helpful to learn some more about the prior TPA and about the corrections.

When you say the plan document was created in the name of the prior TPA, does this mean that the prior TPA was the Plan Sponsor and the client was participating in that plan (think PEO or PEP, for example)? Or, was the situation simply the prior and new TPAs both use the same document provider and there is a concern that somehow the document provider will not allow the new TPA to amend the plan (which is highly unlikely, but is more an operational question for the document provider).

When you say there are certain errors in the original document that need to be corrected retroactively, be very careful about these "certain errors".  If they have anything to do with eligibility, vesting, benefit accruals or other protected benefits, then very likely the either the plan will have to live the consequences of the errors for the period the provisions were in effect, or the plan will need to get a blessing from the IRS (file a VCP) for any proposed changes with a retroactive effective date.

My Spidey Sense says there is a lot more happening here.

[TPApril]

4 hours ago, Paul I said:

 

My Spidey Sense says there is a lot more happening here.

Let's just say the Plan Document is textbook example of why not to go with a bundled vendor.

 

5 hours ago, Bird said:

I have to say that I don't understand this, sorry. But yes you can restate it in either scenario.

Re my wording - I mean that the prior TPA has a Determination Letter for their plan document. I've always been fuzzy on the extent a new TPA can make amendments on existing Plan Docs where the prior TPA basically considers the Plan Doc valid only while Plan Sponsor is a client of said TPA.

 

4 hours ago, Paul I said:

When you say there are certain errors in the original document that need to be corrected retroactively, be very careful about these "certain errors".  

Yes thank you for the reminder. We are particularly sensitive about protected benefits. Most changes are going to be included in the restatement effective moving forward with next plan year. The corrections we wanted to amend include a scrivener's error that affects no one, and to put into the document 2 provisions that the plan has been using but were not in the doc, and do not have negative effect on any participants or benefits.

[Luke Bailey]

7 hours ago, TPApril said:

the prior TPA has a Determination Letter for their plan document

TPApril, Determination Letters are on the individual plan as adopted by the employer and are issued to the employer. A prior TPA would have no ownership or similar rights to the plan document just because it submitted the plan to IRS for letter.

[TPApril]

13 minutes ago, Luke Bailey said:

TPApril, Determination Letters are on the individual plan as adopted by the employer and are issued to the employer. A prior TPA would have no ownership or similar rights to the plan document just because it submitted the plan to IRS for letter.

I find that interesting because I've seen termination of agreement letters stating that once the Plan Sponsor is no longer with the TPA, their Plan Doc is no longer valid.  i guess I assumed incorrectly that that was true.

[Luke Bailey]

TPApril, are you talking Determination Letter or Opinion Letter?

[Peter Gulia]

As Luke Bailey suggests, I imagine the situation you describe involves an IRS-preapproved documents set and the IRS’s opinion letter on it.

While we haven’t seen the plan documents, service agreement, and other facts of your situation, here’s another point that could become relevant in some situations.

Even if both old and new TPAs are licensees of the same plan-documents publisher, don’t assume a document would be constant.

A publisher (ASC, Datair, FIS Relius, ftwilliam, McKay Hochman, etc.), working from the same “chassis” for a kind of plan document, might make many different versions.

Even with nonexclusive licenses, different TPAs might have licensed different versions.

Further, a recordkeeper or third-party administrator (perhaps a “bundled vendor”) might get a publisher to make a custom version. For that version, the TPA might get the whole copyright, share the copyright, or get rights to enforce the publisher’s copyright.

Either way, some versions omit choices a service provider doesn’t want its user to select. Some versions add provisions a service provider insists its user include. Many have customizations—beyond names and identifying information—that relate to the service provider’s business. You might be surprised by some of the plan provisions a service provider seeks to influence.

To be confident that what you hope to accomplish is feasible, you’d need to look into the exact details.

Or if you or your client has any doubt, might it be simpler to start over?

Whatever someone might assert about lacking reliance on an IRS opinion letter when a user no longer gets a service from that document’s sponsor or licensee, one doubts another provider’s service agreement would preclude your client from relying on an IRS opinion letter issued to you (or the publisher you license from) when your client adopts a plan-documents version you licensed.

Nothing I post here is tax or legal advice. TPApril, you should ask your firm’s lawyer.

[Bird]

19 hours ago, TPApril said:

On 11/27/2023 at 9:08 AM, Bird said:

I have to say that I don't understand this, sorry. But yes you can restate it in either scenario.

Re my wording - I mean that the prior TPA has a Determination Letter for their plan document. I've always been fuzzy on the extent a new TPA can make amendments on existing Plan Docs where the prior TPA basically considers the Plan Doc valid only while Plan Sponsor is a client of said TPA.

I have to admit you wrote "amend" but I read "restate" so it was my misunderstanding; now I get it.  I would generally not amend someone else's pre-approved document. It may be a bit silly because I seriously doubt the IRS would DQ a plan because it was no longer sponsored by "prior TPA" and "successor TPA" amended that same document, but it's a bright line that they could use as a hammer, especially if other things are fishy. It's so easy to restate; just do that.

 

[G8Rs]

I'll add 2 or 3 cents here. : ) 

First, you ask if the plan can be amended, but you don't specify who is adopting the amendment - the employer or your firm on the employer's behalf (which sponsors of a pre-approved plan have the authority to do). Your firm can't adopt the amendment on the employer's behalf because they aren't on your plan. That may be an issue when it's time for the next interim amendments and may be reason enough to restatement onto your pre-approved plan prior to the next restatement cycle.

My guess is that in this case it's the employer that will be adopting the amendment. There's nothing that can stop the employer from doing so.

That then raises the question as to whether the plan is still a pre-approved plan. If the amendment isn't deviating from the pre-approved language, then I'd say they have reliance. The IRS doesn't care who does the amendment - it's only a matter of whether you have deviated from the pre-approved language. If they are doing something that's allowed in pre-approved plans but not offered in this specific pre-approved plan then you're covered because at the next restatement you can get retroactive reliance (it may require submitting for a DL if it's still not offered in the pre-approved plan you use). If it's a provision that can't be in a pre-approved plan, then you'd treat the plan as individually designed and you can submit if the plan never received a prior DL. 

[Bird]

12 hours ago, G8Rs said:

That then raises the question as to whether the plan is still a pre-approved plan. If the amendment isn't deviating from the pre-approved language, then I'd say they have reliance. The IRS doesn't care who does the amendment - it's only a matter of whether you have deviated from the pre-approved language. If they are doing something that's allowed in pre-approved plans but not offered in this specific pre-approved plan then you're covered because at the next restatement you can get retroactive reliance (it may require submitting for a DL if it's still not offered in the pre-approved plan you use). If it's a provision that can't be in a pre-approved plan, then you'd treat the plan as individually designed and you can submit if the plan never received a prior DL. 

A minor nit here - I think there could be a (theoretical) scenario where an employer makes an amendment to a pre-approved document that was sponsored by firm X, using pre-approved language, but if X no longer sponsors the document, the document could be disqualified. The scenario is that there is something wrong with the document that was missed in the approval process. If it is not sponsored by firm X, then you can no longer rely on the opinion letter. (Actually this applies whether it is amended or not, which is the main point...once it is no longer sponsored, you technically have an individually designed plan without a favorable determination letter.) 

It's probably going to take about as long to prepare the amendment as it would to restate the plan, at least in our world. If you (TPApril) are reluctant to restate it because the fees are higher and you don't want to have to charge for something that is "unnecessary,"  that is a fee schedule issue. I was pretty hung up on this for years but then realized that the distinction between "amendment" and "restatement" was blurry, at least as far as time involved.

The collective time spent debating this is probably more than the time it would take to restate it. Not complaining; just pointing out that sometimes we get hung up on things when we just need to act and move on.

[TPApril]

8 hours ago, Bird said:

The collective time spent debating this is probably more than the time it would take to restate it. Not complaining; just pointing out that sometimes we get hung up on things when we just need to act and move on.

Are you getting philosophical here about being a TPA, or about life in general? There are times I'd like to do a Personal Restatement.

[TPApril]

14 hours ago, Bird said:

It's probably going to take about as long to prepare the amendment as it would to restate the plan, at least in our world. If you (TPApril) are reluctant to restate it because the fees are higher and you don't want to have to charge for something that is "unnecessary,"  that is a fee schedule issue. I was pretty hung up on this for years but then realized that the distinction between "amendment" and "restatement" was blurry, at least as far as time involved.

Actually what we were planning to do was two restatements, one effective at the beginning of this year, and one effective the beginning of next year. We just thought it would be cleaner and, as you imply, less time consuming than preparing amendments and SMM's, etc.

With that in mind, we were only planning to distribute the SPD for the final restatement.