 NEWSLETTERS Volume 8, Issue 1 .................... June 2008 TIME TO RESTATE YOUR RETIREMENT PLAN In order to have a qualified retirement plan, a plan sponsor must have a written plan document that includes current Internal Revenue Code language. Language within retirement plan documents is updated through plan amendments and through restatement of the entire plan document. The Internal Revenue Service (IRS) now requires that employers with qualified retirement plans that are on prototype documents restate their retirement plan documents every six years. The IRS first disclosed this in Announcement 2004-71 and Revenue Procedure 2005-16 and finalized the restatement process rules in Revenue Procedure 2005-66. The current restatement window will span from May 1, 2008 through April 30, 2010. Administrative Retirement Services, Inc. (ARS) is continuing to sponsoring a pre-approved qualified retirement plan document to restate employers’ plans. ARS’s plan document was approved by the IRS on March 31, 2008. ARS believes this restatement is an opportunity for employers to review their current plan provisions and make changes to enhance their existing retirement plan. We will be contacting you via mail to request any changes you may like to make to your plan’s provisions during the restatement. We anticipate beginning the restatement process in July of 2008. Employers with qualified retirement plans that are on individually designed plan documents must restate their retirement plan documents every five years starting in 2006. The five year cycle is staggered based on the last digit of the employer’s identification number. The Economic Growth and Tax Relief Reconciliation Act (EGTRRA) was enacted in 2001 and is a large component of the current restatement. EGTRRA included extensive changes to the tax code including changes to income tax rates, estate and gift tax exclusions, and qualified retirement plan rules. Below is a summary of the changes made to qualified retirement plan rules through EGTRRA: - 401(k) contribution limits were increased. - Compensation limits for defined benefit plans were increased. - Catch-up contribution provisions were created. - Roth 401(k) contributions were created. This allowed employee after-tax contributions to qualified plans without the compensation phase out limits that Roth IRA’s contain. - Minimum Required Distribution (MRD) could be postponed until after retirement for employees who were not greater than 5% owners. - Life expectancy tables for the MRD calculation were revised and simplified. - The optional involuntary cash-out distribution of terminated participants’ accounts into a default IRA if the vested balance was less than $5,000 was created. - The vesting schedule for matching contributions was changes to a maximum of 6 years. - The total annual contributions permitted for profit sharing plans was increased from 15% to 25% of total eligible compensation. The need for money purchase pension plans was thus eliminated. - For the first time S corporation shareholders, partners and sole proprietors were allowed the option to take loans from their retirement plans. If you have any questions about the restatement process please do not hesitate to contact Administrative Retirement Services, Inc.
© Administrative Retirement Services, Inc. 2008 Published by Administrative Retirement Services, Inc., Copyright 2001 by Administrative Retirement Services, Inc. Reproduction in whole or in part is prohibited except by written permission. All rights are reserved. Information has been obtained by Administrative Retirement Services, Inc. from sources believed to be reliable. However, because of the possibility of human or mechanical error by our sources, Administrative Retirement Services, Inc. or others, Administrative Retirement Services, Inc. does not guarantee the accuracy, adequacy, or completeness of any information and is not responsible for any errors or omissions or the result obtained from the use of such information. Readers should seek specific advice before acting with regard to the subjects mentioned here. |