An employer that has an IRS preapproved retirement plan, such as a 401(k) plan, profit sharing plan, or money purchase pension plan, is required to restate the plan every six years for changes in the law. The last six year restatement cycle ended April 30, 2010 and the IRS has announced that the second restatement cycle will run through April 30, 2016. Any employer that does not restate a preapproved retirement plan by April 30, 2016 will be subject to a late amender penalty.
Generally, an employer is not going to be able to get a determination letter from the IRS specifically approving the employer’s preapproved retirement plan. Only an employer adopting a preapproved volume submitter plan document, one type of preapproved plan, will be able to get a determination letter if the employer has modified the IRS preapproved language of the plan. Submitting a determination letter request now requires an IRS user fee of $500.
An employer that terminates a preapproved retirement plan before April 30, 2016 is required to update the plan for any changes in the law through the date of termination. While in some cases, a terminating plan may not require restatement, an employer terminating a preapproved retirement plan during this period can have assurance that the plan is in compliance by restating the plan.