Restatement and amendment deadlines
Qualified plans must operate in accordance with their plan documents. Ongoing legal and regulatory changes in retirement plan rules frequently require plan sponsors to amend and restate their plans to keep their documents in compliance. Preapproved plans (i.e., master and prototype documents and volume submitter plans) must be rewritten, reviewed and approved by the IRS, and readopted by employers once every six years.
We are currently in the midst of the first six-year restatement cycle, and the EGTRRA document has been approved by the IRS. Employers using preapproved defined contribution plan documents must restate (readopt) them by April 30, 2010.
Cumulative list concept
In order to know what qualification requirements should be included when a plan is being rewritten, the IRS devised the cumulative list concept. Each year, an updated list is issued containing qualification requirements for plans that must be rewritten the following year. The cumulative list simplifies the amendment and review process by establishing cutoff dates: Generally, any laws and/or guidance issued after one cumulative list is published will automatically be included on the next list for the next restatement cycle.
Here’s an example: The EGTRRA preapproved document was written based on the cumulative list issued at the end of 2004 (IRS Notice 2004-84), and the submission deadline for IRS review and approval was January 31, 2006. Most laws and regulatory changes that occurred after the 2004 Cumulative List are not incorporated into the EGTRRA document restatement. Thus, even though many PPA provisions became effective before the plans were approved in early 2008 and might already have been in operation, virtually no PPA language is incorporated into the approved document.
However, the Treasury Department and the IRS both have the power to, and often do, require interim document amendments to incorporate changes after a cumulative list has been issued. Preapproved plans must make these so-called “snap-on” amendments to incorporate the changes by the prescribed deadline. Required changes since the last restatement cycle will be written into the next document.
PPA amendment deadline
The Pension Protection Act of 2006 (PPA), which was enacted after the 2004 Cumulative List was published, requires that plans operate under PPA provisions as each becomes effective but does not require that plans be amended until the end of the first plan year beginning on or after January 1, 2009.
Ordinarily, required amendments like those for PPA changes could be made up until a plan’s due date for filing its tax return for the 2009 plan year. However, the IRS has indicated that there may be anti-cutback issues (which, if not correctly handled, would reduce a benefit already earned by the participant) if the PPA amendment is not completed before the end of the plan year. (The IRS plans to publish a list of anti-cutback issues.) This amendment deadline applies to both interim and discretionary amendments made pursuant to statutory PPA provisions and any PPA-related regulations. Thus, the EGTRRA restatement deadline of April 30, 2010, is not applicable to the PPA amendment, and plans may need to be amended for PPA before they are restated for EGTRRA. In this case, the PPA amendment should then be brought over to the EGTRRA restatement.
Individually designed plans and PPA
Individually designed plans that are off-calendar-year Cycle D plans have an opportunity to meet the deadline for adopting PPA language by the last day of their 2009 plan year. To accomplish this, they may elect to be Cycle E plans, which would change the submission period to between February 1, 2010, and January 31, 2011. These plans will be Cycle D plans for the following restatement cycle, which has a submission period of February 1, 2014, through January 31, 2015. In this case, employers would not have a full five years between cycles.