August 13, 2009
IRS Cycle D Retirement Plan Filings: Six Months and Counting
Calendar-year multiemployer pension and annuity plans have only until January 31, 2010 to submit their Cycle D determination letter requests to the Internal Revenue Service (IRS), covering plan amendments made since the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA). While this might seem like plenty of time, there is, in fact, no time to lose. Preparing this determination letter filing may take longer, and require more assistance from fund counsel and others, than past filings because of the new IRS determination letter program rules. Therefore, to assist trustees, The Segal Company is devoting this issue of Compliance Alert to Cycle D action items.
In 2005, the IRS revamped its determination letter program to provide staggered remedial amendment cycles for retirement plans. In accordance with this program, multiemployer plans are to be submitted to the IRS for a renewed determination of their qualified status under the tax code every five years, on the schedule labeled Cycle D, which starts with the 12-month period running from February 1, 2009 through January 31, 2010. The filing timetables for other types of plans are based on the sponsor's Employer Identification Number or special characteristics of the plan.
This new program, currently described in Rev. Proc. 2007-44,1 is a complete restructuring of the IRS determination letter process with new rules for when plans must be amended, when plans may be submitted to the IRS, and what must be included with a submission. Also as part of this new program, the IRS began to publish an annual Cumulative List of Changes in Plan Qualification Requirements (officially called the Cumulative List), describing the technical issues and requirements that the IRS will review in determining whether a plan has been properly updated for changes in laws, regulations and other rules since its last determination letter was issued. The 2008 Cumulative List was released on November 25, 2008, and identifies the statutory, regulatory and guidance changes that Cycle D plans must take into account in their determination letter filings.2
Cycle D Action Items
To prepare for the filing deadline, sponsors of Cycle D plans should take the following steps:
- Determine the filing deadline. Sponsors of Cycle D plans with plan years beginning January 1 through February 1 generally must file on or before January 31, 2010. Sponsors of Cycle D plans with plan years beginning February 2 or later, may defer making their filing until any time in Cycle E (February 1, 2010-January 31, 2011). Because this is the first time that multiemployer plans will be dealing with the new determination program and its rules, the determination letter filing delay could be a valuable option for those plans able to take advantage of it. These plans do not need to request permission to defer; they need only file before the January 31, 2011 deadline and they will be treated as having filed within the appropriate period. The plans will remain Cycle D plans and will be required to make all future filings in accordance with Cycle D, so they will need to file again in the 12-month period that starts February 1, 2014 if they want continued assurance that they meet the tax qualification requirements.
- Even if taking advantage of the determination letter filing delay, make required plan amendments. The deferred filing date for some of the Cycle D plans does not change the deadlines for making plan amendments. Any amendment that must be made before the end of the EGTRRA remedial amendment period (January 31, 2010 for Cycle D plans) still has to be made by January 31, 2010. Similarly, all other amendments required to be made by a specified amendment date, have to be made by that date. Also, these plans will need to include the amendments required for Cycle E before they are filed because they will be reviewed on the basis of the 2009 Cumulative List, not the 2008 Cumulative List, which applies to Cycle D submissions.
- Locate filing-related documents. All plan amendments, the trust agreement plus any amendments, and merged plan documents must be included in the filing. If the plan incorporates by reference other documents, such as participation agreements, reciprocity agreements or collective bargaining agreements, the relevant portions of those documents (but not the complete document) must be included in the filing or the determination letter will not cover the incorporated language. In addition, a copy of the plan's last IRS determination letter filing package, if available, will be a useful source of information in preparing the Cycle D filing.
|Documents to be Included in the Filing|
|The following documents must be included in the filing:
- All plan amendments made since the determination letter filing for GUST,3
- The Trust Agreement, plus amendments made since the GUST filing, if any, and
- Documentation related to plans merged into the plan since the last determination letter (plan documents, amendments, favorable determination letters).
Relevant portions of the following documents are required to be included in the filing to obtain determination letter protection for language incorporated by reference in the plan:
- Participation agreements for employers contributing for non-bargained participants,
- Reciprocity agreements, and
- Collective bargaining agreements.
- Determine who will prepare the plan restatement. A restated plan document must be submitted as part of the Cycle D filing. The restatement can be a working copy that has not yet been adopted by the trustees and must include all amendments adopted since the last determination letter filing. This generally will require having any additional amendments required under the 2008 Cumulative List prepared and adopted by the trustees, and having all amendments integrated into the plan document itself.
- Determine the preparation timing. Arrangements for preparation of the Cycle D filing should be made as soon as possible. Preparation of a restated plan document and the related materials is complicated work that, even in the best of circumstances, could stretch over several months. To ensure adequate time to prepare all of the necessary documents, work on restatement projects should begin soon. Delay may make timely filing difficult or impossible.
- Determine if IRS review of nondiscrimination testing will be requested. If the plan has non-bargained participants, nondiscrimination testing for contributions or benefits related to those participants is generally required at least every three years unless a testing safe-harbor applies. Plans do not have to request IRS review on this question, but those that want an IRS ruling on this should begin to gather the necessary information about the participants' compensation and how it compares to other employees' pay from contributing employers as soon as possible.
- Consider if a Voluntary Correction Program (VCP) filing is needed. Fund counsel should review all required and discretionary amendments made since the last determination filing to ensure that all have been made and properly adopted. In the event that there are amendment-related concerns, various options under Rev. Proc. 2008-504 (the IRS correction program) are available to correct both "non-amender" and operational issues. Plans that want to use these options generally must start the process before or at the same time that they file for a new determination letter.
- Prepare the necessary filing package(s). For a standard determination letter filing, choose a filing date. It is generally advisable to choose a date that builds in room for unanticipated delays. Whatever date is chosen, please remember that the Notice to Interested Parties must be given no more than 24 days, and no less than 10 days, before the filing date.5 If a VCP filing is needed, review the IRS correction program materials carefully to determine what forms and materials should be submitted for the particular type of filing and whether the determination letter filing must submitted with the VCP filing, or is submitted separately.
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As with all issues involving the interpretation or application of laws and regulations, trustees of multiemployer plans should rely on their fund counsel for authoritative advice on the interpretation and application of the Internal Revenue Code. The Segal Company can be retained to work with sponsors of multiemployer retirement plans and their attorneys on Cycle D filings.
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