Every qualified retirement plan is required by ERISA to have a written plan document. The plan document provides the instructions on how the plan is to operate. In order to remain qualified, the plan must operate in accordance with the terms of the document, and be updated for changes in the tax law.
The IRS has specific rules on how often a plan has to be amended or restated to comply with changes in the tax laws. An amendment can address a single change or issue, e.g., change in eligibility or implementing provisions of the HEART Act. A plan restatement is a completely new plan document. It incorporates all previous plan amendments and any other law changes into a unified plan document with a new summary plan description for participants.
Many plans use prototype or volume submitter plans, under which a plan document provider will get IRS approval for the document with certain options. As long as the plan document provisions selected by the plan are within the covered parameters, the plan does not have to apply for a separate determination letter as to its qualified status. These are called “pre-approved plans.” All pre-approved plans are on a six year restatement cycle.
The IRS is issuing opinion and advisory letters on most pre-approved filings beginning April 2014. The “window” for restating your plan onto a pre-approved document is from May 1, 2014 through April 30, 2016. Your document provider will be contacting you during this window about restating your plan. Since your entire plan will be restated, this is a great time to take a critical look at your plan provisions to determine whether they are working well for you.
Consider:
- Your eligibility requirements
- Entry dates
- Excluded classes of employees
- Allocation formulas
- Vesting
- Distribution options
- Plan options can be added or deleted at this time, with a few limited exceptions on deletions.
- Adding Roth deferrals, and Roth in-plan conversions
- Automatic enrollment features
- Hardship distribution provisions and loan provisions
- Safe Harbor provisions
- Changing your allocation formula
Remember that you must operate your plan in accordance with its written terms. If there is something that isnot working well for you, contact your relationship manager to discuss alternatives.
