New Plan Restatement Window Opens

May 2014Articles For Your Benefit

Several years ago, with an eye toward leveling its workload, the IRS instituted a cyclical compliance system. Individually designed retirement plans are subject to a five-year remedial amendment cycle based upon the last digit of the plan sponsor’s taxpayer identification number. Employers adopting pre-approved documents, including volume submitter plans and prototype plans, however, are required to restate their plans on a uniform six-year cycle. The current restatement period for such plans officially opens on May 1, 2014, and continues through April 30, 2016.

While those employers sponsoring volume submitter or prototype plan documents previously were entitled and encouraged to secure individual determination letters by filing a Form 5307 Application for Determination, that option has been all but eliminated. This is based on changes which, though announced by the IRS late in 2011, did not have widespread impact until this new restatement period.

Adopters of prototype plans must rely upon the opinion letters issued to the underlying prototype plan sponsors and may not seek an individual determination letter. Adopters of volume submitter plans may seek an individual determination letter but only if changes have been made to the pre-approved language. There is a catch, however, in that if the changes are deemed to more than minor, the plan will be considered to be an individually designed plan (subject to the five-year remedial amendment cycle) and will not be eligible for the extended reliance afforded to pre-approved plans.

We will be contacting all of our clients for whom we prepare plan documents over the course of the coming months to initiate the restatement process. While, for many plan sponsors, the restatement will serve solely to update the language for compliance purposes, it provides the perfect opportunity to revisit the plan design and make any elective changes that may be desired.

For more information regarding this topic, please contact Susan Foreman Jordan at (412) 391-1334 or [email protected] or any member of the Fox Rothschild LLP Employee Benefits & Compensation Planning Practice Group.