An important April 30, 2010 IRS deadline is fast-approaching for employers who have adopted preapproved master and prototype or volume submitter defined contribution retirement plans (“pre-approved plans”). April 30th is the deadline for two key action steps:
- First, by April 30th, employers adopting pre-approved defined contribution plans must adopt their provider’s pre-approved EGTRRA plan restatement. Employers who have not received an EGTRRA restatement from their prototype or volume submitter plan sponsor should contact their provider immediately. It is important to make sure that these plan documents are timely executed.
- Second, April 30th is also the deadline for submitting an individual determination letter application to the IRS for pre-approved defined contribution plans. While this step is not required, it may nevertheless be the prudent course of action in many circumstances, as explained below.
The institutions that sponsor pre-approved plans have received an IRS opinion letter on their preapproved plan. If you adopt one of these pre-approved plans, the IRS opinion letter indicates the IRS's acceptance of the terms of your underlying plan document, but opinion letters are not an individualized ruling or determination on the tax-qualified status of your particular plan. Opinion letters will provide the most reliance for employers who have adopted their pre-approved plan word-for-word, or who have only elected modifications that are offered among the menu of options provided within the plan’s adoption agreement.
However, if you have modified the pre-approved plan by making changes not accommodated in the adoption agreement, or if your modifications are unique or numerous, obtaining an individual determination letter may be the more prudent course of action, because an individual determination letter can provide added assurance that your plan (as modified) meets the IRS’ criteria for tax-qualified status. For example, if you have changed the pre-approved plan with regard to categories of employees that are excluded from plan participation or eligibility requirements for employer contributions, you may wish to consider getting an individualized determination letter on your plan. In addition, having an individualized determination letter may be advantageous in plan mergers, corporate transactions, and plan terminations.
These two important April 30th deadlines are right around the corner. Sponsors of pre-approved defined contribution plans should contact plan providers soon to obtain EGTRRA plan restatements and to discuss determination letter submissions.