The IRS Office of Chief Counsel recently issued a Memorandum of Generic Legal Advice that makes clear that the IRS expects each qualified plan and plan amendment to be signed and retained by the employer. While this may seem simple, many employers do not carefully maintain plan documents. In the Memorandum, the IRS states: “…it is appropriate for IRS exam agents and others to pursue plan disqualification if a signed plan document cannot be produced by the taxpayer.”
In the Memorandum, the IRS concludes: “A plan is considered adopted only if proof of adoption of the plan is provided…. Upon failure to produce an executed plan, the employer has the burden to prove that it executed a plan document as required.”
Sometimes, employers have relied on board resolutions to evidence adoption of a plan document lacking a signature. This memorandum raises the question whether board resolutions alone can save an unexecuted plan document. Many employers rely on accountants, lawyers, and other service providers to maintain their plan documents. Specifically delegating this recordkeeping duty should be documented, preferably in the service provider agreement where you can also provide for indemnification if a failure to maintain executed plan documents results in plan disqualification. When changing providers, employers should also be careful to retrieve signed plan documents.
A good New Year’s resolution might be to check all of your plan documents for signatures and to consider how best to maintain the official record of your signed plan documents.