Many employers have adopted defined contributions plans using “pre-approved” plan documents, referred to as either “master and prototype” (“M&P”) or “volume submitter” (“VS”) documents, which are sponsored by vendors such as banks, mutual fund companies, third party administrators and law firms. Document sponsors were required to submit their documents to the IRS by January 31, 2006 for pre-approval that the documents complied with various law changes, including the Economic Growth and Tax Relief Reconciliation Act of 2001 (“EGTRRA”). The IRS announced last week that it expects to issue approval letters for such documents on March 31, 2008. The approval triggers a requirement that all employers who use pre-approved documents for EGTRRA plan restatements must adopt such documents by April 30, 2010.
The IRS announcement also provides that employers adopting pre-approved plans can submit their plans to the IRS for individual determination letters starting May 1, 2008. Most employers who choose to apply for individual determination letters will be able to do so by filing IRS Form 5307 rather than Form 5300, for which the current filing fee is $300. In some circumstances, employers who adopted pre-approved plans have made changes to the plans that require them to be filed on Form 5300, which currently has a $1,000 filing fee. Employers that must use Form 5300 also may need to adopt additional amendments.
As a result of the IRS approval letters, employers with plans that use pre-approved documents should be hearing from their document providers soon regarding adoption of documents newly approved by the IRS.