IRS Extends Deadline for Amending Retirement Plan Documents

If your company sponsors a tax-qualified retirement plan, you are probably all too aware of the effect our constantly changing tax laws can have on your plan. Keeping up with these changes is important because your company and the employees participating in your plan may lose important tax benefits if you don’t.

The IRS requires employers to operate their plans in accordance with all applicable law changes as they become effective. In addition, employers must update their written plan documents to reflect the changes within the time prescribed by the IRS.

In a recent announcement, the IRS extended the "GUST" remedial amendment period for preapproved plans to September 30, 2003. (Generally, preapproved plans include prototype and volume submitter plans sponsored by financial institutions, brokerage firms, and professional firms for the use of their clients.) GUST is the acronym the IRS uses to refer to the six laws listed below.

• Uruguay Round Agreements Act
• Uniformed Services Employment and Reemployment Rights Act of 1994
• Small Business Job Protection Act of 1996
• Taxpayer Relief Act of 1997
• Internal Revenue Service Restructuring and Reform Act of 1998
• Community Renewal Tax Relief Act of 2000

This extension is good news for many employers. The previous GUST deadline for most preapproved plans was December 31, 2002. Note, however, that companies that sponsor an individually designed plan should already have completed the GUST amendment process.

Another significant law, the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), also contained numerous provisions that affect qualified plans. Many of the EGTRRA provisions are effective for 2002 plan years. Employers must adopt "good faith" EGTRRA plan amendments by the end of the GUST remedial amendment period or, if later, by the end of the plan year in which the amendments are required to be, or are optionally, put into effect.

Your deadline for adopting EGTRRA amendments will therefore depend on whether your company sponsors an individually designed or a preapproved plan.

• If your company sponsors an individually designed plan and you want to — or are required to — amend the plan for an EGTRRA provision that takes effect in the 2002 plan year, you have until the end of the plan year to adopt the necessary amendments (until December 31, 2002, for a calendar-year plan).
  
  
• If your company sponsors a preapproved plan, you generally have until September 30, 2003, to make necessary EGTRRA amendments for the 2002 plan year. However, in some cases, an EGTRRA amendment may be required earlier — by the end of the 2002 plan year.

Don’t wait to review your plan and start the amendment process if you haven’t already done so. If you have questions, please contact us.

The information provided in the newsletter has been obtained from sources believed to be reliable but its accuracy is not guaranteed.