The EGTRRA Restatement Period Begins

by Bill Mayer 

Congress has a history of frequent tweaking of the retirement plan rules. The changes come fast and furious. While employers are required to operate their plan in compliance with the changes as soon as they take effect, they have historically been given a little relief when it comes to updating the language in their plan document. In the past, employers were required to update the plan about every 5-7 years incorporating all the changes that were made since the last big plan rewrite. Well, we're now at another BIG PLAN REWRITE.

The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) became effective for plan years beginning in 2002. This restatement period has been named the EGTRRA restatement period because all of the changes from EGTRRA and some other less extensive guidance must now be incorporated into plan documents.

All pre-approved defined contribution plans (prototype and volume submitter) need to be restated by April 30, 2010. All 401(k), profit sharing, money purchase or target benefit plans that are eligible for the six-year remedial amendment period* must be restated and if they choose, submitted to the IRS for an individual determination letter by this date.

You may be wondering whether the Pension Protection Act of 2006 (PPA) will be included in this restated document. That is a good question. The answer is that EGTRRA pre- approved plan documents are only required to incorporate the legislation from the 2004 cumulative list of changes**. PPA was not yet enacted when the current pre-approved EGTRRA documents were submitted to the IRS for review. Plans do not have to be updated for PPA until the last day of the plan year beginning in 2009. So PPA will be part of the pre-approved document as an amendment until the next restatement.

*What is the six-year remedial amendment period?

In the past the restatement cycles have been somewhat haphazard. The IRS has now created a systematic six-year cycle. Pre-approved plans must be restated every six years to incorporate the interim amendments and any discretionary amendments that have been adopted since the last restatement. At the end of this six-year period, there will be a two- year window in which to update the plan document and if desired, submit the document to the IRS for a letter of determination. We have just entered the first window of restatement for defined contribution plans under this new program. The EGTRRA restatement window began May 1, 2008 and will end on April 30, 2010.

**What is the Cumulative List?

Each year the IRS publishes a list of required changes to be included in a plan document. It is expected that this list will be published mid-November each year. Any new requirements on the list since the prior year need to be added to the plan by amendment. This new IRS procedure is the reason you may have received a 2007 interim amendment.

Why not wait until the end of 2009 or early 2010 to restate our document?

You should consider restating your document earlier in the period. This is an excellent time to review the current plan provisions and be sure the restated plan will meet your goals. For those of you who went through the GUST restatement several years earlier, you may recall how quickly time passes. The Benefits Consulting Group, Inc. will be providing you with more information on the EGTRRA restatement process soon.