By Brandy Cross, Milliman
Have you heard about PPA restatements but aren’t sure what’s required? Let’s start with some background on the process, and then describe steps that retirement plan sponsors should take to implement it.
All plans that use a preapproved plan document must be restated before April 30, 2016. Failure to amend by this date will require the plan to submit an application to IRS, through its Voluntary Compliance Program, to correct this error. Potentially hefty VCP fees could apply depending on the size of the plan.
If your qualified defined contribution retirement plan uses a base plan document with most of the basic features of the plan and an adoption agreement that allows you to select some specific plan features (as opposed to having an individually drafted plan document where there is just one document written specifically for the provisions of your plan), then you have a preapproved plan document.
Almost a decade ago, IRS determined that all preapproved plans would have to be restated periodically — every six years to be exact. This would allow them to pull in all the law changes in the previous six years and, hopefully, make the plans easier to read, administer and review.
Cycles
The first cycle was referred to as the Economic Growth and Tax Relief Reconciliation Act of 2001 restatement, which was to be completed no later than April 30, 2010.
In early 2014, IRS released the approval letters to sponsors of preapproved plans for the second cycle, referred to as the Pension Protection Act of 2006 restatement. The PPA restatement brings in required changes from that legislation, as well as all subsequent regulatory changes — including Heroes Earnings Assistance and Relief Tax Act of 2008 and Worker, Retiree and Employer Recovery Act of 2008.
Now is an excellent time for every plan sponsor to review the plan provisions to ensure they are in line with actual plan operations, as well as to ensure that the plan is meeting the goals and needs of the plan sponsor and plan participants.
To read the complete story on Thompson’s HR Compliance Expert, click here.
Brandy Cross is a Principal and compliance manager with the Midwest Employee Benefits Practice of Milliman.