A Guide to Plan Restatements

    Multnomah Group, Inc.

     

    Plan documents must be updated from time-to-time to conform to changes in the federal tax laws made by Congress, or to reflect regulations under the Internal Revenue Service or Department of Labor. The last mandatory restatement period for pre-approved plans (master & prototype or volume submitter) was April 30, 2010. Since then, there have been a number of regulatory and legislative changes impacting retirement plans, including the following:

    • Regulations dealing with post-severance compensation (Section 415 regulations)
    • Heroes' Earnings Assistance and Relief Tax Act of 2008 ("HEART")
    • Worker, Retiree and Employer Recovery Act of 2008 ("WRERA")
    • Pension Protection Act of 2006 ("PPA")

    Plan sponsors should have already adopted interim good faith amendments for the above regulatory and legislative changes. In the current restatement period, the plan document will be re-written to incorporate the full text of the language that those interim amendments previously summarized.

     

    Pre-Approved Plans

    The majority of plan sponsors use pre-approved plan documents for their qualified defined contribution plan. Since the last restatement period, pre-approved plan document sponsors have submitted revisions to the IRS of their documents which incorporate the interim amendments noted above. The IRS recently completed their review, and issued opinion and advisory letters to these pre-approved plan document providers. There is now a two year window where employers must re-adopt their plans. This two year window runs from May 1, 2014 – April 30, 2016 and is being referred to as the “PPA restatement.” 

    An employer who adopts a pre-approved plan document with no changes may not apply for its own determination letter. Instead, the employer should rely on the letter issued to the plan document provider. However, an adopting employer who made modifications (to a volume submitter plan) may apply for a determination letter.

    It is important to note that recently created plans (at a minimum, those created prior to May 1, 2014) likely do not satisfy the PPA restatement requirement since the IRS had not yet issued the approval letters. As a result, plan sponsors of recently created plans should consult with their document provider, as they may likely still need to restate the plan document.

    Failure by plan sponsors to complete the restatement during this window could result in plan disqualification, and disqualification can cause unintended tax consequences for both employers and participants.

     

    Individually Designed Plans

    Plan sponsors with individually designed plan documents restate their plans on a different five year restatement cycle. Their deadlines are generally determined by their Employer Identification Number (EIN).

    Cycle Last Digit of Employer's EIN Special Situations Next Filing Cycle
    A 1 or 6   Closed
    B 2 or 7 Multiple Employer Plans Closed
    C 3 or 8 Governmental Plans Closed
    D 4 or 9 Multiemployer Plans 2/1/2014 - 1/31/2015
    E 5 or 0   2/1/2015 - 1/31/2016

     

    Plan sponsors with closed windows may still need to adopt interim and good faith amendments (see below).

    A plan sponsor with an individually designed plan document may wish to consider transitioning to a pre-approved plan document for ease of maintenance and administration. Special timing and election rules may apply. Contact your Multnomah Group representative if you have questions about transitioning your document.

     

    Interim and Good Faith Amendments

    Interim and good faith amendments are required to keep a written plan document current between remedial amendment cycles. For plan sponsors who will restate their plan after December 31, 2014, an interim amendment may be required by the end of the year to comply with IRS guidance on same gender marriage. In June 2013, the Supreme Court in United States v. Windsor, invalidated Section 3 of the Defense of Marriage Act (DOMA) which limited marriage to opposite sex couples for purposes of federal law, including the Employee Retirement Income Security Act of 1974 (ERISA). As such, depending on the language of your plan document, an interim amendment may be required by December 31, 2014 to comply with the Windsor decision.

     

    Discretionary Amendments

    Plan sponsors may also adopt discretionary amendments. Discretionary amendments must be adopted by the end of the plan year in which the plan amendment is to be effective.