EGTRRA Document Updates
Rev. 07/21/05, E-mail Alert 2005-14

The EGTRRA document restatement process is very different from the one used for GUST. Where are we now in this process?

EGTRRA Document Updates
In June of 2005, the IRS confirmed that, although the deadline for lead document submissions by document drafters, such as McKay Hochman Co., Inc., remains October 31, 2005, adopting prototype sponsors of lead document drafters would have until January 31, 2006, to make their document submissions. However, the IRS has not yet released all the guidance, including model document language, needed by document providers to prepare their EGTRRA restatements. This information is expected shortly so that deadlines can be met.

At this point in time, the final 401(a)(9) regulations (i.e., the list of required modifications (LRM) for required minimum distributions) have already been issued, and proposed LRMs for cross-tested allocation formulas have been released for public comment. Practitioners will provide comments on the proposed LRMs and then the final LRMs will be issued. The final Roth 401(k) LRMS have not yet been issued. Once the cross-tested allocation formula and Roth LRM issues are resolved, lead document providers will be able to proceed with confidence.

We have gleaned a great deal of information from clients who have attended our Prototype Plan Seminars. We are using their insightful suggestions to help design the best possible EGTRRA document. There is one more session of this Seminar planned for this year in Coraopolis, PA on August 16 and 17; call us at 973-492-1880 to register.

Final 401(k) and 401(m) Regulation Implementation Guidance
The final regulations for 401(k) and 401(m) plans are effective for plan years beginning after December 31, 2005. They may be implemented currently if the plan sponsor is willing to have all the regulations effective. To implement these regulations, applicable provisions will have to be added to the current GUST document by amendment. However, as with the LRM issue noted above, we are still waiting for guidance from the IRS on the amendment process. The same is true for the Roth 401(k) provisions. We will keep you informed.

Six-year Cycle for Pre-approved Plans
Where are we at in the six-year cycle table for pre-approved plans? The six-year cycle starts this year for defined contribution prototype and volume submitter plans and will commence in 2007 for defined benefit plans.

In addition, the good faith interim amendments may be needed based on updated IRS guidance or new laws. The current remedial period (RAP) rule requiring that all pre-approved plans be updated by the end of the 12th month following the receipt of the document sponsor's opinion letter would be eliminated. A new single date deadline, applicable to all adopting employers, will be announced by the IRS and will replace the 12-month rule.

Employers who are not currently using a pre-approved plan but who wish to adopt one before the end of their plan's RAP may do so by certifying their intent to so adopt such a plan. For example if an individually designed plan has a RAP ending December 31, 2008, the employer may certify its intent to adopt a pre-approved plan by that date. The effect of the certification is that the employer will have until the end of the pre-approved plan's RAP to adopt that plan.

The cycle provides that the plan with employer identification numbers (EINs) ending in 1 or 6 must be restated in the first year (2006) and restated again 2011. EINS ending in 2 or 7 would be restated in the second year (2007), and again in 2012, and so forth. Note that one of the two ending numbers will always coincide with the last digit of the calendar year. Also, each year's deadline is actually January 31 of the following year. Thus, plans that must be submitted in 2006 actually have a deadline of January 31, 2007.

Although plans will not need to be amended in interim years, depending on the circumstances and to assure interim compliance, the IRS intends to issue model amendments similar to those issued for EGTRRA and the 401(a)(9) Required Minimum Distribution that may be adopted by individually designed plans.

NOTE: Keep in mind that we are still living under the sunset provisions of EGTRRA which bring the EGTRRA changes to an end 10 years after the passage of EGTRRA in 2001 - unless Congress enacts a law to make the changes permanent. Otherwise, the EGTRRA document will contain many provisions that are no longer supported by law.

Attached for reference is Revenue Procedure 2005-66 on the new Remedial Amendment Procedure. Also linked is Revenue Procedure 2005-16. which addresses the Master and Prototype plan and Volume Submitter EGTRRA document process.

Bill Grossman, QPA