By Joshua A. Diveley
Retirement plan sponsors that adopted a defined contribution plan document pre-approved for use by the IRS generally must restate their plan in full every six years. The next restatement deadline is April 30, 2016. If a plan sponsor does not adopt a restated plan document by the deadline, the plan is considered disqualified and is no longer entitled to tax-favored treatment. This may reduce the permissible deduction for contributions to the plan and make it harder for employees to save for their retirement and make tax-favored rollovers of distributions to other plans or individual retirement accounts.
Previously, the only way an employer could correct a failure to adopt a pre-approved plan by the deadline was to complete a submission under the Voluntary Correction Program. A new option allows a financial institution or service provider to request a closing agreement on behalf of plan sponsors. These would be similar to a group submission under the VCP, but under these closing agreements the organization doesn’t need to have made a systemic error.
For more information regarding the new corrective option, see: https://www.irs.gov/Retirement-Plans/New-Program-Allows-Providers-of-Pre-Approved-Plan-to-Correct-Missed-Deadlines.
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