The IRS has provided advice for adopting employers of Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) pre-approved defined contribution (DC) plans that did not either adopt an approved EGTRRA restated plan document or submit a determination letter application to the IRS by April 30, 2010. April 30, 2010 was the last day of the two-year period for employers of EGTRRA pre-approved DC plans to adopt an approved restated document and file a determination letter application, as required by IRS Announcement 2008-23.
Adopting restated plan document after April 30, 2010
The IRS noted that, in general, under the six-year remedial amendment cycle rules in IRS Rev. Proc. 2007-44, the failure to adopt a restated plan document by April 30, 2010 will adversely affect the qualified status of the plan. The IRS explained that employers that adopt a restated plan document after April 30, 2010 may submit an application under the Voluntary Correction Program (VCP), a component of the Employee Plans Compliance Resolution System (EPCRS). VCP is available as long as the plan (or in the case of a tax-exempt entity, the adopting employer) is not under examination by the IRS. The IRS noted that it has developed a Voluntary Correction Program Submission Kit, which these employers may use to make a VCP submission to resolve a failure to adopt plan amendments in a timely fashion.
Filing determination letter application after April 30, 2010
The IRS explained that, in general, determination letter applications for pre-approved DC plans that are submitted after April 30, 2010 will be treated as off-cycle filings. The applications will generally not be worked on by the IRS until the on-cycle applications have been reviewed, according to the IRS. As to post-April 30, 2010 off-cycle applications already submitted, the IRS will contact the employers and offer them the opportunity to withdraw the applications. The IRS will refund any user fees that have been paid if withdrawal requests are made.
There are exceptions to the off-cycle treatment of post-April 30, 2010 determination letter applications. The following applications will be considered on-cycle and worked on with other timely received on-cycle applications.
- 1. An application that is submitted on or before January 31, 2011 for plans maintained by nongovernmental employers with Employer Identification Numbers (EINs) ending in a 5 or 0, or EINs ending in 4 or 9 whose first plan year begins on or after January 1, 2009 and ends on or after February 1, 2010; and plans maintained by a governmental employer.
2. An application received by July 30, 2010, if the employer and plan qualify for the special relief in IRS Notice 2010-48, which extended the deadline for adopting and submitting a DC pre-approved plan for plans affected by certain recent federally declared disasters.
The IRS noted that, although the six-year EGTRRA remedial amendment cycle for pre-approved DC plans ended April 30, 2010, the five-year EGTRRA remedial amendment cycle for the plans in category 1 above ends on January 31, 2011. Determination letter applications filed for these plans on or before January 31, 2011 will be considered to be on-cycle.
Forms 5307 and 5300. If a plan in category 1 or 2 is submitted on Form 5307, the plan will be reviewed based on the 2004 Cumulative List. If the plan is submitted on Form 5300, the plan will generally be reviewed based on the Cumulative List in effect on the date the application is submitted.
Employers submitting a determination letter application for a plan described in category 1 or 2 above should indicate which category the plan is eligible for in the application’s cover letter, according to the IRS.
Source: IRS Retirement News for Employers, Summer 2010 Edition. http://hr.cch.com/news/pension/090210a.asp