The deadline for restating a 401(k), profit sharing, or money purchase pension plan to a pre-approved Pension Protection Act document has come and gone. So what’s a fiduciary to do? It was, after all, a responsibility of the plan fiduciary to ensure that the plan was updated and signed by the April 30, 2016 deadline.
However, there is a Plan B to avoid plan disqualification. The Internal Revenue Service (“IRS”), of course, doesn’t call it that. The proper term is IRS’ EPCRS Late Amender Program. “EPCRS” stands for the IRS’ Employee Plans Compliance Resolution System which provides a method for plan sponsors to correct failures and get their plans back into compliance.
In brief, here’s how the voluntary correction procedure for non-amenders works:
- Plan sponsors would adopt the restated plan and then submit the required paper work to the IRS for approval.
- The fee for the submission is based on the number of plan participants.
- However, if the document failure is corrected and the filing is submitted within one year of the restatement deadline (no later than April 30, 2017) the submission fee is reduced by 50%.
You may be wondering if there is a Plan B, is there also a Plan C. Not exactly, and it’s certainly not voluntary. It’s the consequence of not taking advantage of the afore-mentioned Late Amender Program.
It’s the IRS’ Audit Agreement Closing Program (“Audit CAP”) which is the end result of a plan audit. If the IRS finds the plan to be non-compliant, the plan sponsor would be required to submit an updated plan to avoid disqualification. The cost of which would be significantly more than if the missed deadline was dealt with on a voluntary basis.
The takeaway should be obvious: Contact them before they contact you.
Photo credit: CanStockPhoto.
