Form 8905 Update
Rev. 12/15/06, E-mail Alert 2006-23

General Information
Form 8905, Certification of Intent to Adopt a Pre-approved Plan, is intended for use by an employer who is changing from an individually designed plan (5-year cycle) to a pre-approved plan (6-year cycle). Although the instructions on the Form indicate it is to be submitted to the IRS, the IRS has clarified that Form 8905 need not be submitted to the IRS unless the underlying plan is submitted. Both the adopting employer and the pre-approved plan sponsor that the employer will be moving to for their new document must sign the Form.

Revenue Procedure Issues
To introduce the new 5-and 6-year restatement cycles, the IRS wrote Revenue Procedures 2005-16 and 2005-66. Revenue Procedure 2005-16 made a distinction between employers who adopt GUST pre-approved plans on or before February 16, 2005 (Prior Adopters) and those who adopt after that date (New Adopters).

Form 8905 — just to be safe strategy
Rev. Proc. 2005-16 appears to infer that New Adopters may not be eligible for the pre-approved cycle, thus they would be best served if they file a Form 8905 to be sure that it is understood that there is an intent for them to be on a prototype plan cycle. Because this is not clearly stated, the major document providers, including McKay Hochman, are recommending that their “New Adopters" execute Form 8905. We have mentioned this in our April/May 2006 Prototype Plan News Newsletter, in seminars/eSeminars, and in response to phone calls. Some providers are insisting that all their clients execute the Form, just to be safe.

IRS Clarification Expected
Informally, the IRS has indicated that those who validly adopted a pre-approved plan by the end of their individual EGTRRA RAP need not execute Form 8905. This was confirmed in an update of Revenue Procedure 2005-66 that is RP 2007-44. However, pending actual issuance of this guidance the prudent practice remains to obtain a Form 8905 from those who adopted your plan after February 16, 2005.

Bill Grossman, QPA