This advisory is to remind plan sponsors of deadlines for amending qualified retirement plans and for submitting certain plans to the IRS for a determination letter.

Plan sponsors must adopt “discretionary” plan amendments no later than the last day of the plan year in which the amendment is effective. Discretionary amendments are permitted to be adopted by the plan, but are not required. For example, plan loans are permitted to be part of certain plans but are not required. An employer instituting a plan loan or other optional features in 2012 would need to amend the plan before December 31, 2012 (for calendar year plans).

“Cycle B” plans (defined below) will generally need to be amended and restated no later than January 31, 2013. Note, if a Cycle B plan has discretionary amendments, those amendments still must be adopted by December 31, 2012 (for calendar year plans).

Normally, all qualified retirement plans must adopt interim amendments no later than the due date of the plan sponsor’s 2012 tax return (with extensions). However, not every year has interim amendments that must be adopted. It appears that in 2012 no interim amendments are required, other than for governmental plans.

Please consult your Alston & Bird attorney regarding interim amendments for your Plan, because, for example, depending on future guidance, cash balance or other hybrid plans may be required to adopt certain interim amendments.

I. Certain Delayed Amendments for Governmental Plans

Governmental plans have later deadlines when adopting amendments for some law changes. The key amendment deadlines for governmental plans are:

  • HEART – must be amended by December 31, 2012.
  • WRERA – must be amended by December 31, 2012.  

Non-governmental plans should already have incorporated these changes, and many governmental plans elected to adopt them before the deadline. If you sponsor a governmental plan, you should be aware of these deadlines already.

II. Rolling Deadlines to Adopt Certain Pension Protection Act (PPA) Changes.

With few exceptions, the deadline for calendar year plans to adopt amendments required by the PPA was December 31, 2009. However, because the IRS did not release critical guidance on several aspects of the PPA, the IRS extended the deadline to adopt certain amendments. The following amendments have approaching deadlines:

  • Distribution and benefit accrual restrictions based on funding of defined benefit pension plans (Code Section 436). This provision must be adopted by December 31, 2012. Most plans have already incorporated these changes, but if your plan has not, you should prepare to make this amendment this year.
  • Special rules applicable to cash balance and similar defined benefit plans (Code Section 411(a)(13)(C)).

III. Discretionary Amendments Potentially Due by December 31, 2012

Plan sponsors should be careful to consider any changes to a plan made in 2012, including operational or administrative changes that may require the adoption of a plan amendment. A discretionary amendment relates to a plan design change that is not mandated by a change in law. An employer has the option to make changes to the plan design or the administration of the plan, but once made, those changes may require a plan amendment. Plan sponsors should review plans to determine whether there are discretionary amendments that should be adopted. Though not an exhaustive list, examples include the following:

  • adding designated Roth contributions to a 401(k) plan;
  • adding an automatic contribution arrangement (also known as a negative election feature); and
  • adding or changing loan or hardship distribution provisions.

Plan sponsors should also be careful about amendments that decrease eligibility or decrease the amount of benefits provided under a plan. In many cases, this type of amendment cannot be adopted retroactively, but can only be adopted prospectively. For example, eliminating or reducing an employer matching contribution should only be done prospectively. Similarly, some provisions that increase benefits can only be added prospectively. For example, the addition of a cash or deferred (401(k)) contribution to a plan can only be applied prospectively.

IV. Cycle B Filings Due by January 31, 2012

Individually Designed Plans

The IRS has established staggered deadlines for employers to file their qualified retirement plans with the IRS for a determination letter. As a general rule, every individually designed qualified retirement plan is assigned a specific five-year cycle (Cycles A-E) based upon the last digit of the plan sponsor’s employer identification number (EIN). If the plan sponsor’s EIN ends in 2 or 7, the plan is a Cycle B plan. However, if the parent company in a controlled group sponsors a Cycle B plan, the parent can elect that all plans sponsored by members of its controlled group also file under Cycle B. Additionally, if your plan is a multiple employer plan, it is a Cycle B plan, regardless of the plan sponsor’s EIN. Plan sponsors who desire to obtain an IRS determination letter must submit Cycle B plans for a determination letter request no later than January 31, 2013 (plan sponsors should verify the EIN of their subsidiaries or other divisions maintaining their own separate plans). The effect of this system is that plan sponsors need to apply for new determination letters generally only once every five years. Prior to each cycle, the IRS issues guidance (in the form of a Notice entitled “Cumulative List of Changes in Plan Qualification Requirements”) on the provisions that must be included in each plan that is being submitted for a determination letter. Plan sponsors should review the Cumulative List (see Notice 2011-97) issued in connection with Cycle B filings to make sure that all required amendments are included in the plan document.  

For your information, the general filing cycle information is as follows:

Click here to view table.

Pre-Approved Plans

Master & Prototype (M&P) plans and volume submitter (VS) plans are generally reviewed on a six-year cycle. 2012 is not a cycle year, and therefore, no filings are required to be submitted to the IRS in 2012.

V. Conclusion

Plan sponsors should review their qualified retirement plans now to ensure compliance with required amendment and filing deadlines. Please do not hesitate to contact your Alston & Bird attorney if we can assist you in proper filing procedures for your qualified retirement plan and to discuss any plan amendments and applicable deadlines.