EGTRRA Document Restatements for Defined Contribution Plans

Over the last seven years, Congress and the Internal Revenue Service have been busy overhauling the laws and regulations that govern the operation of qualified retirement plans. The major changes include the following legislation and regulatory guidance:

• Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA)
• Final Regulations under Code Sections 401(k) and (m)
• Job Creation and Worker Assistance Act of 2002 (JCWAA)
• Mandatory Cash Out Rules under Code Section 401(a)(31)
• Final Regulations under Code Section 415
• Pension Funding Equity Act of 2004 (PFEA)
• Pension Protection Act of 2006 (PPA)
• Heroes Earnings Assistance and Relief Act of 2008 (HEART)

Plan sponsors have different deadlines under IRS rules to completely rewrite their legal plan documents in order to consolidate these amendments into one revised document. The most substantial body of the new laws is found in EGTRRA. Hence, the retirement services industry refers to the revised plan document needed to comply with these laws collectively as the "EGTRRA restatement."

For defined contribution plans, volume submitter and prototype documents must be restated and executed by April 30, 2010. A "volume submitter" or "prototype" document is a document where the "basic" provisions are "pre-approved" by the IRS. Although submission of the plan document to the IRS by the plan sponsor for a separate favorable determination is optional, we recommend it. A favorable determination letter can be relied on for up to a six year period and gives the plan sponsor assurance that any plan language that was not "pre-approved" satisfies the IRS requirements. In addition to the EGTRRA restatement, defined contribution plans will be required to execute separate amendments for certain provisions under the Pension Protection Act of 2006 (PPA). These amendments must be signed by the end of the 2009 plan year. The EGTRAA restatement process for "Individually Designed Plans" ("IDP") began several years ago. An IDP is a plan in which the design features are too complex to fit within the framework of a "pre-approved" prototype or volume submitter plan. The restatement deadlines for IDPs are staggered into five cycles, based on the last digit of the employer’s Taxpayer Identification Number. The deadline for the first cycle (Cycle A) was January 31, 2007, with each subsequent annual deadline over the following five year period (the deadline for the last cycle, Cycle E, is January 31, 2011).

The restatement of the plan is also an opportune time to address any changes in plan design. For example, many employers are considering adding Roth contribution and/or auto-enrollment features to their plans. Incorporating these plan design changes now will eliminate the need to further amend the plan after the EGTRRA restatement is completed.

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