Plan Updates

Your 401(k) plan is a Qualified Plan. The DOL regulations provide that a plan that covers only partners or a sole proprietor is not covered under Title I of ERISA. Pursuant to Department of Labor Regulations 2510.3-3(c). However, even though a solo 401(k) plan is not subject to Title 1 of ERISA, the ERISA rules are still looked at as a reference because a solo 401(k) Plan is still a qualified retirement plan. 401(k) generally has greater protection than an IRA.

April 30, 2016, is the deadline for employers using pre-approved retirement plan documents to sign an updated version of their 401(k), profit-sharing or other defined contribution retirement plans.

Retirement plan documents must be revised when the law changes. In an updated web page, the Internal Revenue Service (IRS) reminds plan sponsors that document providers who offer pre-approved plans update the plan in its entirety once every six years and request a new opinion/advisory letter from the agency. The IRS generally approves all updated defined contribution plans at the same time. Most opinion/advisory letters for the latest round of pre-approved defined contribution plans were issued on March 31, 2014. Employers have two years, until April 30, 2016, to adopt these updated plans.

After April 30, 2016, if a plan sponsor hasn’t adopted a restated plan, the plan does not comply with the tax laws and may be ineligible for tax benefits.

Providers should have sent plan sponsors a revised plan document, approved by the IRS, which complies with the Pension Protection Act of 2006 (PPA) and other law changes listed on the 2010 Cumulative List of Changes in Retirement Plan Qualification Requirements. Even if plan sponsors made amendments to your plan to reflect these laws as they became effective (interim amendments), they are still required to adopt a PPA plan document.

Most employers don't need to apply for a separate IRS determination letter for a pre-approved plan, and a plan sponsor who adopts a master & prototype plan (standardized or non-standardized) may not apply for its own determination letter. Instead, the plan sponsor should rely on the approval letter issued to the document provider.

In the past the restatement cycles have been somewhat disorganized. The IRS has now created a systematic six-year cycle. Pre-approved plans must be restated every six years to incorporate the interim amendments and any discretionary amendments that have been adopted since the last restatement. At the end of this six-year period, there will be a two- year window in which to update the plan document.