Some employee benefit plans are set-up as pre-approved plans. Typically this includes prototype and volume submitter plans. This basically means that the plan is operating under a Plan Document from a financial institution, adviser or similar provider that has requested IRS opinion or advisory letters on the tax status of the Plan. These types of plans use IRS approved wording and generally have limited customization.
Revision of the plan
Pre-approved plans are generally updated entirely by your provider every 6 years and they send a request for a new opinion or advisory letter from the IRS. This is to ensure that as the law changes the retirement plan documents comply with these revised laws. According to the IRS.gov website, most of these letters for the latest round of approvals were issued on March 31, 2014. Employers have two years from the date of issuance to adopt these updated plans; therefore, the upcoming deadline is April 30, 2016. If adoption is not completed within this time frame, the plan will not be in compliance with the current tax laws.
How to adopt a revised plan document
The first step is to contact your provider. They should have sent you a revised plan document which would be approved by the IRS. This will comply with law changes as set forth on the 2010 cumulative list of changes on the IRS.gov website. Be aware that even if you amended your plan you should still be sure to adopt a Pension Protection Act of 2006 (“PPA”) plan document.
It is important to ensure that your plan is up to date and in compliance with current tax laws to ensure the plan is eligible for tax benefits. If you are unsure if you are in compliance, we recommend contacting your provider to ensure all of your plan documents are up to date.
By Brie C. Keckler, CPA