Seven Things Every TPA Should Know About EGTRRA Restatements
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Some pension professionals may still have an unclear understanding of the EGTRRA Restatement staggered remedial cycles. The five and six year cycles depend on differentiators such as plan type and EIN. Additionally, since the IRS cumulative list has not been updated to include all recent items, practitioners need to keep abreast of new developments that may require application. Listed below are top issues that every TPA should know to help expedite the restatement process.
1. The EGTRRA Restatement process is defined in three important IRS Revenue Procedures. They are:
• Revenue Procedure 2005-16 – The IRS provided the general rules for pre-approved plans (prototype and volume submitter).
• Revenue Procedure 2005-66 – The IRS created the rules for a 5-year cycle for individually designed plans and a 6-year cycle for pre-approved plans.
• Revenue Procedure 2007-44 – The IRS completely restated and replaced the Rev. Proc. 2005-66.
2. All qualified retirement plans must be restated to comply with EGTRRA. The previous EGTRRA amendment that accompanied the GUST restatement does NOT constitute an EGTRRA restatement.
3. The EGTRRA restatement is divided between two different cycles. There is a 5-year cycle that applies to individually designed plans and a 6-year cycle that applies to pre-approved plans (prototype and volume submitter). For more information about each cycle please reference the Staggered Remedial technical update.
4. The deadline for each plan type depends upon the cycle associated with each of your documents. For example, if you have an individually designed plan with an EIN of 3 then you must restate your plan by January 31, 2009. If you have a pre-approved plan then the restatement period has begun and the deadline for restatement is April 30, 2010.
5. The IRS has a cumulative list of items that need to be included in all plans for the EGTRRA restatement. Many recent items are not included in this list, therefore amendments will need to be applied to your EGTRRA plan documents once you restate. The amendments at this time that should be applied are the final 415 regulation and the Pension Protection Act. It is very important that your firm stays up to date on all amendments because there may be additional amendments that need to be applied when new regulations are passed.
6. The next restatement will be for the Pension Protection Act of 2006. The IRS has not set a time period yet. However, following the 5-year and 6-year cycles, the defined contribution restatement should begin in 2011 for pre-approved plans and 2012 for individually designed plans.
7. Defined benefit pre-approved plans are on a different six year cycle. They were submitted January 31, 2008, and are in the early stages of the six year cycle. However, individually designed defined benefit plans (such as cash balance plans) are on the SAME five year cycle as defined contribution plans.