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Required Changes To Qualified Retirement Plans Retirement plan sponsors must now amend their plan documents to bring their plans into actual compliance with the GUST legislation and submit them for IRS approval by December 31, 2001... Mark Bokert A. Derek Nelson e-mail this article URL Over the last few years, Congress enacted major legislation affecting retirement plans. The principal legislation included the Uruguay Round Agreements Act ("GATT"); the Uniformed Services Employment and Reemployment Rights Act of 1994 ("USERRA"); the Small Business Job Protection Act of 1996 ("SBJPA"); the Taxpayer Relief Act of 1997 ("TRA97"); and, the Internal Revenue Restructuring and Reform Act of 1998 ("RRA98") (collectively referred to as "GUST"). During this legislative period, retirement plan sponsors, while not required to actually amend their retirement plans, were required to operate their retirement plans in compliance with the GUST legislation. Retirement plan sponsors must now amend their plan documents to bring their plans into actual compliance with the GUST legislation and submit them for IRS approval by December 31, 2001 (this deadline is for calendar year plans; the deadline for fiscal year plans is described below). We urge any of our clients that maintain a qualified retirement plan, such as a 401(k), profit sharing, or pension plan, to bring it to our attention immediately. It will take time to amend the plan and prepare the lengthy approval application. Any failure to meet the applicable deadline may result in serious consequences for your plan. In accordance with guidance issued by the Internal Revenue Service, qualified retirement plans must be amended on or before the last day of the first plan year beginning on or after January 1, 2001. For "calendar year" retirement plans this means the plan must be amended and in actual compliance with the GUST legislation on or before December 31, 2001. For "fiscal year" retirement plans this means the plan must be amended and in actual compliance with the GUST legislation on or before the end of the plan year beginning in 2001. An important aspect of the GUST amendment process for clients is the determination of whether the underlying retirement plan is a non-prototype or prototype plan. This determination is important because the amendment, adoption and approval process for a non-prototype plan (i.e., custom-design or former prototype plans) requires more time to complete. First, non-prototype plans must be reviewed in their entirety and the appropriate GUST provisions added to or deleted from the plan document. In addition, clients with non-prototype retirement plans should submit these plans to the IRS for a determination letter once the plans are amended for GUST. A favorable IRS determination letter approves of the amendments and provides assurance that the retirement plan, in its amended form, meets the standards for continued favorable tax treatment. The combination of these two factors will necessarily lengthen the time it takes to bring these plans into compliance because the GUST provisions must be identified, drafted, adopted and submitted to IRS on or before the applicable deadline. Where "prototype" plans are concerned, obtaining a favorable determination letter is not as critical an issue as in the case of a non-prototype plan since a prototype plan can generally rely on the generic IRS opinion letter issued to the original plan sponsor at the time the plan was first submitted to IRS. Despite this fact, we urge clients who believe they have a prototype plan to contact their prototype plan sponsor and determine whether the plan sponsor will be amending their prototype plan for GUST. If the plan sponsor is not amending the prototype plan, it is critical that this determination be made early so other arrangements can be made to ensure that the plan is appropriately amended in a timely fashion. Finally, we urge any client maintaining a retirement plan to begin the GUST amendment planning and adoption process as soon as possible. Any undue delay may make it difficult to adopt the necessary GUST amendments, or make the desired IRS submission, on a timely basis. Moreover, a failure to timely amend the retirement plan may have an adverse effect on the tax-qualified status of the retirement plan. We are happy to meet with you to discuss any issues or concerns you may have concerning this matter or assist you with drafting so feel free to call us. © 2001 Davis & Gilbert LLP       Davis & Gilbert LLP • 1740 Broadway • New York, NY 10019 tel: 212.468.4800 • fax: 212.468.4888   Privacy Policy • Terms & Conditions