OUR THOUGHTS ON:

Cyclical Remedial Amendment Periods

401(k) Plans

By Jason Lumpkin

During 2005, the IRS released Revenue Procedure 2005-66 (updated and superseded by Revenue Procedure 2007-44), which formally implemented a system of cyclical remedial amendment periods during which all qualified retirement plans (QRPs) are required to be updated to reflect all changes in statutes, regulations or other IRS-published guidance, as well as any discretionary amendments that had been implemented since a plan’s previous remedial amendment period.

Under this rule, a QRP’s remedial amendment period is subject to either a 5-year cycle or a 6-year cycle, depending on the type of plan document that is being utilized (pre-approved prototype, volume submitter, or individually designed). Plans classified as pre-approved “prototype” or “volume-submitter” plans are generally subject to a 6-year cycle as prescribed by the Internal Revenue Service. For this purpose, prototype plan practitioners must apply for a new Opinion or Advisory Letter from the IRS once every 6 years, with the most recent cycle starting on May 1, 2009.

Plans classified as individually designed, such as employee stock ownership plans, are subject to a 5-year cycle. While the cycles for pre-approved plans are generally the same for all plan sponsors who adopt a prototype or volume-submitter plan, the cycles for individually designed plans commence in different years based on the plan sponsor’s employer identification number (EIN). The effect of this system is that plan sponsors of individually designed plans should apply for a new determination letter once every five years as follows:

 

Last Digit of EIN Ends With:

Cycle

First 5-Year Cycle

Restatement Deadline

1 or 6 A February 1, 2011 through January 31, 2016 January 31, 2012
2 or 7 B February 1, 2012 through January 31, 2017 January 31, 2013
3 or 8 C February 1, 2013 through January 31, 2018 January 31, 2014
4 or 9 D February 1, 2014 through January 31, 2019 January 31, 2015
5 or 0 E February 1, 2015 through January 31, 2020 January 31, 2016

In summary, plans operating under a pre-approved prototype or volume-submitter plan document should have been updated no later than April 30, 2010 and every six years thereafter (the next applicable deadline is expected to be April 30, 2016); and plans operating under an individually designed plan document should be updated in accordance with the chart above, depending on the last digit of the plan sponsor’s EIN. As such, employers who sponsor QRPs should ensure that their plan documents are being updated appropriately.

© 2013 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax related matter.

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Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2018 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

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