Preapproved (prototype or volume submitter) defined contribution plans must be restated for the Pension Protection Act by April 30, 2016.
Master and prototype and volume submitter plans are generally required to be updated and restated on a six year cycle. The current cycle for preapproved defined contribution plans ends April 30, 2016. Therefore, if you have a preapproved defined contribution plan, you must restate the plan no later than April 30, 2016. In addition, if you want to receive IRS approval of your restated plan, the filing must be made with the IRS on or before April 30, 2016. However, the IRS does not accept applications for many pre-approved plans. As we all know, the end of the year and the beginning of the year are busy for HR so the April 30, 2016 deadline is close at hand.
As noted in previous blogs, the IRS announced elimination of the five year determination letter remedial amendment cycle program for individually designed plans. Individually designed plans will no longer be able to obtain IRS determination letters except for new plans and terminating plans. A transition rule applies for certain plans currently in the five year cycle, (i.e., Cycle E and Cycle A plans may still file for determination letters).
If you have an individually designed plan that falls under Cycle E (the plan sponsor’s EIN ends in five or zero), you can restate and file the document with the IRS by January 31, 2016. This is generally recommended for employers who have Cycle E plans, especially considering the changes to the IRS determination letter program.
Individually designed plans which are on Cycle A (the plan sponsor’s EIN ends in one or six) can still restate their plans and obtain a determination letter from the IRS by restating the plan and filing it on or before January 31, 2017.
Some plans will now be switching to pre-approved plans to avoid the risk of operating without a determination letter. However, many employers will want to delay switching to a pre-approved plan until the next deadline for adoption, which under the current rules would appear to be April 30, 2022. Of course, adopting a pre-approved plan avoids the legal risk associated with the end of the determination letter program, but will not meet the needs of many employers, especially employers with sophisticated or complex plans. These plans are going to tend to be too unique to fall under prototype or volume submitter programs. For example, employers who have had substantial acquisitions or dispositions.
As the April 30, 2016 deadline looms, employers should review their plan documents to ascertain the effects of the April 30, 2016 deadline for prototype and volume submitter plans and the potential changes to the IRS determination letter program. When April 30, 2016 passes, some flexibility for employers will be lost. Finally, employers who are in Cycle A or Cycle E should seriously consider restating their programs and filing within the timeframes of these cycles.