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"An Ounce of Prevention...Carefully Review Your New Retirement Plan Adoption Agreement Before Signing"
If you have a defined contribution retirement plan (e.g., a 401(k) plan), it is very likely a pre-approved "prototype" or "volume submitter" plan supplied to you by your plan administrator or other outside company. These pre-approved plans, which usually consist of a Basic Plan Document and an Adoption Agreement where adopting employers check appropriate boxes among various options, are reviewed by the IRS every six years to ensure they have incorporated all of the required legal updates. All pre-approved defined contribution plans should have recently received a new IRS opinion letter stating that their updated plans are "re-approved." Employer sponsors now have a two-year window to adopt these updated plans; the window began on May 1, 2014 and expires April 30, 2016.
In the next few months, you should receive an updated and restated Basic Plan Document and Adoption Agreement, and will be asked to sign the Adoption Agreement before April 30, 2016. Be sure to READ YOUR ADOPTION AGREEMENT before you sign it. You do not want to inadvertently change options in your plan (either options that can't be changed or options you actually want to keep). Voluntary correction requests are routinely filed with the IRS' error correction program, asking for forgiveness for plan sponsors who blindly signed Adoption Agreements, which ultimately resulted in operational and documentation errors. The expense associated with these filings can be avoided.
For those of you with individually designed plans, don't forget the Cycle D filing deadline is coming up on January 31, 2015 for all employers/plan sponsors whose EIN ends in 4 or 9. Now is the time to incorporate any required or discretionary amendments, restate your plan, and submit it to the IRS for a determination letter.
Our benefits attorneys are available to assist you in reviewing your new Adoption Agreement or in restating your individually designed plan, as well as to advise you on additional plan changes you may wish to consider during this restatement process. Spending a little time on the front end of this process could save you much more time – and money – down the road by avoiding the need for a correction.