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IRS Builds EGTRRA Into Plan Review Procedure

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Federal regulators have come up with a procedure for taking the Economic Growth and Tax Relief Reconciliation Act of 2001 into account when they review model plans based on sections 401 and 403(a) of the Internal Revenue Code.

The Internal Revenue Service has published the rules in a document, Revenue Ruling 2005-16, that explains the schedules life insurers, accounting firms and other organizations should use when submitting “master and prototype” plans and “volume submitter” plans.

Companies that get IRS opinion and advisory letters approving those types of model plans can sell new plans based on them without necessarily having to go back to the IRS for further review.

The IRS had to change plan review procedures to accommodate changes made by EGTRRA, according to an explanation of the changes by Ingrid Grinde, an IRS employee plans specialist.

The IRS announced in 2001 that it would not issue advisory, opinion or determination letters that took the EGTRRA changes in plan rules into account until further notice.

Section 401 plans include stock bonus plans, profit-sharing plans and pension plans. One of the best known 401 plans is the 401(k) retirement savings plan. A 403(a) plan is an annuity-based plan. Sponsors of that type of plan fund employee retirement benefits by purchasing individual annuities for each employee.

The IRS will accept applications for opinion and advisory letters that take EGTRRA into account for all kinds of 401 and 403(a) model plans starting Feb. 17.

The submission period for the new model plans will end Jan. 31, 2006. The IRS will decide when employers can adopt the model plans after it has reviewed the preapproved documents, Grinde writes.

The IRS will accept applications for determination letters for individually designed plans affected by EGTRRA sometime on or after Feb. 1, 2006, and it will accept applications for opinion and advisory letters that take EGTRRA into account for preapproved defined benefit plans starting Feb. 1, 2007.

The revenue procedure describes many technical changes in requirements for preapproved plans.

One relatively simple change, for example, will let employers fix minor typos and update cross-references in preapproved plan documents.

Another change will exclude Section 105 plans from eligibility for IRS advisory or opinion letters, Grinde writes.

A third change will let companies get advisory letters for defined benefit plans that provide for employee contributions.

Reproduced from National Underwriter Edition, February 25, 2005. Copyright 2005 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.


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