EGTRRA Deadline Approaching
Rev. 10/30/09; E-mail Alert 2009-17

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, 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 IRS has approved the EGTRRA defined contribution document. Employers using preapproved defined contribution plan documents must restate (readopt) them by April 30, 2010.  The review of EGTRRA defined benefit documents is currently underway, with approval expected around calendar year end.

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 have already 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 announced plans to publish such a list of anti-cutback issues, but with time growing short, has not done so yet.) This amendment deadline applies to both interim and discretionary amendments made pursuant to statutory PPA provisions plus 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 Amendment
Individually designed plans that are off-calendar year Cycle D plans have an opportunity to keep the deadline for adopting PPA language by the last day of their 2009 plan year. Cycle D plans are for those employers with a taxpayer identification number ending in the numbers 4 or 9 who are using individually designed plans rather than pre-approved.  These employers are normally required to restate their plans by January 31, 2010, unless they take advantage of the change and delay amendment to the restatement date.  However, since January 31, 2010 may be earlier than the last day of the 2009 plan year, a special election opportunity has been provided. 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. However, these plans will revert to Cycle D plans for the following restatement cycle, and the submission period would be February 1, 2014, through January 31, 2015. In this case, employers would not get a full five years between cycles.

HEART, EESA, WRERA Amendments
The amendment for the Heroes Earnings Assistance and Relief Tax Act of 2008 (HEART) is not due until the 2010 plan year, although some plans are incorporating HEART and PPA provisions at the same time. The Emergency Economic Stabilization Act of 2008 (EESA) amendment is also not due until the 2010 plan year, but again some plans are incorporating EESA and PPA provisions at the same time. An amendment for the provision suspending defined contribution plan required minimum distributions, part of the Worker, Retiree, and Employer Recovery Act of 2008 (WRERA), is not due until the 2011 plan year. The IRS has promised guidance on the scope and timing of the amendment.

Money Purchase or Target Benefit Plans
For money purchase and target benefit arrangements, there may also be an issue regarding the Normal Retirement Age being changed from an age less than 62 to 62. Actually, we allow the employer to amend from an age less than 55 to 55. It should be understood that an age of 62 or higher is deemed reasonable, whereas an age between 55 and 62 does not have automatic deference and it must be substantiated that the age is normal for the employer’s industry. Another final possible employer change also relates to the Money Purchase and Target Benefit plans, where the employer can now allow in-service withdrawals pre-NRA beginning at age 62. Previously, in-service withdrawals were prohibited pre-NRA.

DB Amendments for 2009
A PPA, PFEA, or RASD amendment must be made to the GUST document by the end of 2009. An amendment for terminating plans is on our Portal and news of this has been provided via e-mail.  We are in the process of preparing a PPA, HEART, EESA and WRERA amendment for on-going plans. This amendment takes into account the recently released regulations on Sections 430 and 436 relating to funding and limitations on distributions.

NEED HELP GETTING RESTATEMENTS DONE? CONTACT US AT 973-492-1880.

Bill Grossman, ERPA, QPA