Retirement Plans FAQs regarding Plan Language Issues for GUST and EGTRRA

These frequently asked questions and answers provide general information and should not be cited as any type of legal authority. They provide the user with information responsive to general inquiries. Because these answers do not apply to every situation, yours may require additional research. These FAQs provide information on GUST and EGTRRA plan qualification requirements.

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1. What guidance is used to determine whether a plan document is "qualified"?

GUST:

1. What does the acronym "GUST" mean?
2. How is the determination letter process affected by the changes in qualification requirements enacted by GUST?
3. How long do I have to amend my plan for the changes in the qualification requirements enacted by GUST?
4. What are the major pre-99 changes made by GUST?
5. What are the major post-98 changes made by GUST?
6. Are most GUST plan restatements written to be effective in 1994, 1997, or in the "current" (i.e. year of adoption) plan year? Does it matter as long as the specific provisions relate back to the appropriate effective dates?

EGTRRA:

1. What does the acronym "EGTRRA" mean?
2. How is the determination letter process affected by the changes in qualification requirements enacted by EGTRRA?
3. How long do I have to amend my plan for the changes in the qualification requirements enacted by EGTRRA?
4. What are the major changes made by EGTRRA?
5. Are most EGTRRA plan restatements written to be effective in 1994, 1997, or in the "current" (i.e. year of adoption) plan year? Does it matter as long as the specific provisions relate back to the appropriate effective dates?

What guidance is used to determine whether a plan document is "qualified"?

A qualified retirement plan must meet the applicable requirements of Internal Revenue Code section 401(a). This section changes from time-to-time as Congress enacts new laws that change existing qualification requirements. GUST changed various plan qualification requirements. In 2001, Congress enacted EGTRRA, which again significantly changed these requirements.

Guidance explaining these requirements may be found in the income tax regulations, revenue procedures, revenue rulings, and other pronouncements issued by the Internal Revenue Service.

A preprinted booklet of checksheets that contains hundreds of questions concerning qualification must be addressed by Employee Plans (EP) specialists before a plan may receive a determination letter if Form 5300 is filed. Specialists who are reviewing Form 5310 are required to complete a smaller set of checksheets that focus entirely on pertinent information disclosed on the application. A review of Form 6406 is limited to the specific checksheets that address the qualification of the minor amendments. A similar approach is used to evaluate Form 5307, as the volume submitter or master or prototype (M&P) plan document submitted for a determination letter was previously subject to a comprehensive and detailed review of the qualification of its provisions under IRC 401(a) before the Service issued the advisory or opinion letter to the practitioner or prototype plan sponsor. Accordingly, any review of the application is limited to elective provisions (eligibility, vesting allocation or benefit formula, etc.) selected by the adopting employer.

What does the acronym "GUST" mean?

The term "GUST" refers to:

• the Uruguay Round Agreements Act. Pub. L. 103-465 which implemented the Uruguay Round of General Agreement on Tariffs and Trade ("GATT");
• the Uniformed Services Employment and Reemployment Rights Act of 1994, Pub. L. 103-353 ("USERRA");
• the Small Business Job Protection Act of 1996, Pub. L. 104-188 ("SBJPA");
• the Taxpayer Relief Act of 1997, Pub. L. 105-34 ("TRA '97");
• the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206 ("RRA '98"); and
• the Community Renewal Tax Relief Act of 2000, Pub. L. 106-554 ("CRA").

How is the determination letter process affected by the changes in qualification requirements enacted by GUST?

Determination Letters:

In January 1998, the Service announced in Rev. Proc. 98-14, 1998-4 IRB 22 the opening of the determination letter program for qualified plans seeking to comply with the changes in the qualification requirements made by the Uruguay Round Agreements Act, Pub.L. 103-465 (GATT); the Taxpayer Relief Act of 1997, Pub.L. 105-34 (TRA '97); and the Small Business Job Protection Act of 1996, Pub.L. 104-188 (SBJPA) (including IRC section 414(u) and the Uniformed Services Employment and Reemployment Rights Act of 1994, Pub.L. 103-353 (USERRA)), that are effective before the first day of the first plan year beginning on or after January 1, 1999. These changes are often referred to collectively as GUST I changes because they do not include the qualification requirements that are effective in plan years beginning after 12/31/98 or that were enacted by CRA 2000.

In Rev. Proc. 2000-27, 2000-26 IRB 1272, the Internal Revenue Service opened the determination letter program effective for applications filed with the Service on or after June 26, 2000, to allow sponsors of individually designed plans including volume submitter plans to obtain determination letters that take into account all the changes in the qualification requirements made by GUST including those changes made by SBJPA that are first effective in plan years beginning after 12/31/98. These determination letters are referred to as GUST II or full GUST letters.

With the issuance of Rev. Proc. 2001-6, 2001-01 IRB 194, the Service announced that effective with respect to applications filed after March 3, 2001, it would no longer accept applications requesting a pre-GATT or GUST I determination letter for individually designed plans including volume submitter plans. Only full GUST determination letters would be issued on applications received after March 3, 2001 for individually designed plans including volume submitter plans.

With the enactment of the Community Renewal Tax Relief Act of 2000 (CRA 2000), the requirements for a full GUST determination were expanded to include a modification to the definitions of section 415 and 414(s) compensation. See Notice 2001-37, 2001-25 IRB 1340, for further explanation of these changes and for a model amendment that may be adopted to satisfy the requirements of CRA 2000. CRA 2000 amendments must be adopted within the GUST remedial amendment period.

Opinion, Notification and Advisory Letters:

In February, 2000 the Service issued Rev. Proc. 2000-20, 2000-6 IRB 553 which revised and combined the master and prototype and regional prototype plan programs into a unified program. It also opened the unified program to allow sponsors to obtain opinion letters covering all the requirements of GUST (including the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206 (RRA - 98)). [The opening date was April 7, 2000 for mass submitter plans and May 8, 2000 for non-mass submitter plans.] This revenue procedure also opened the Service's volume submitter program to allow practitioners to obtain complete GUST advisory letters for their volume submitter specimen plans. The submission deadline date was December 31, 2000.

Announcement 2000-99, 2000-51 IRB 591 reminds sponsors of M&P plans and practitioners who sponsor volume submitter specimen plans that the deadline for applying for GUST opinion and advisory letters was December 31, 2000.

How long do I have to amend my plan for the changes in the qualification requirements enacted by GUST?

In general, you have until the last day of the first plan year beginning on or after January 1, 2001 to amend or restate your plan for the changes in the qualification requirements enacted by GUST. For calendar year plans this is December 31, 2001. This is the end of the remedial amendment period under section 401(b) of the Code for amending plans for GUST. (See Rev. Proc. 2000-27, 2000-26 IRB 1272)

Note: Although plan amendments are not required before the end of the remedial amendment period, plan sponsors must operate their plans in accordance with the applicable provisions of GUST prior to plan amendment to the extent earlier operational compliance is required by law or regulation or other IRS guidance. (See Section 6.06 of Rev. Proc. 97-41, 1997-33 IRB 51)

Adopters and prior adopters of master and prototype, regional prototype, and volume submitter specimen plans that satisfy certain requirements are eligible for an extension of the remedial amendment period. In other words, they are eligible for an extension of the time by which their plans must be restated for GUST. This extension will not expire before the end of the twelfth month beginning after the date on which a GUST opinion or advisory letter is issued for the relevant master and prototype or volume submitter specimen plan. (See Section 19 of Rev. Proc. 2000-20, 2000-6 IRB 553)

To be eligible for this 12-month extension period, the following requirements must be satisfied:

1. Before the end of the remedial amendment period without regard to the 12-month extension, the employer must adopt a M & P plan or a volume submitter specimen plan; or
2. Before the end of the remedial amendment period without regard to the 12-month extension, the employer and a M & P plan sponsor or volume submitter practitioner must certify in writing that the employer intends to restate its plan for GUST using an M & P plan or a volume submitter specimen plan; and
3. The M & P plan sponsor or volume submitter practitioner must have submitted an application for a complete GUST opinion or advisory letter by December 31, 2000.

With the issuance of Notice 2001-42, 2001-30 IRB 70, the twelve-month extension period described above will be treated as not expiring earlier than December 31, 2002.

In a major development that will dramatically reduce the number of applications for GUST determination letters that must be filed in order to comply with the extended remedial amendment guidelines of Rev. Proc. 2000-20, the Service has issued Announcement 2001-77, 2001-30 IRB 83. The announcement modifies reliance on opinion and advisory letters issued for nonstandardized master and prototype (M&P) and volume submitter plans to allow employers who adopt these plans to rely on a favorable opinion or advisory letter with respect to most qualification requirements without requesting a determination letter. This expansion of reliance will make the extension of the GUST remedial amendment period described above even easier to obtain, as the extension will no longer be contingent on the filing of a determination letter request for a GUST M&P or volume submitter plan that was adopted within the twelve-month extension period.

However, it is important to note that this expanded scope of reliance is dependent on an employer adopting a plan that is identical to an M&P or approved volume submitter specimen plan except for the choice of options that are permitted under the terms of the plan. Also, the M&P or volume submitter plan must have, at minimum, a GUST I letter; if no GUST II letter has been issued, the plan must have been amended to comply with all GUST requirements that become effective after 1998. In addition, the plan must have been amended to the extent necessary to comply with the Community Renewal Tax Relief Act of 2000, relative to changes in the definition of compensation under IRC 414(s) and IRC 415(e). See the Announcement for a detailed list of the qualification requirements for which reliance has been granted and other limitations and conditions on the overall scope of reliance.

What are the major pre-99 changes made by GUST?

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What are the major post-98 changes made by GUST?

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Are most GUST plan restatements written to be effective in 1994, 1997, or in the "current" (i.e. year of adoption) plan year? Does it matter as long as the specific provisions relate back to the appropriate effective dates?

In our experience, the most frequently occurring plan restatement effective date has been the beginning of the 1997 plan year. Assuming there are no other relevant issues involved, the general effective date of the restatement does not matter as long as the correct effective date of each GUST provision is clearly defined in the document.

• Prior adopter (meaning the plan was administered with a GUST-approved supplied specimen);
• New adopter (where the pre-approved document was adopted prior to the expiration of the otherwise determined 5 year cycle);
• Intended Adopter (where the employer certifies intent to adopt the pre-approved document, by executing Form 8905 prior to the expiration of the otherwise determined 5 year cycle); or
• Replacement Plan adopter (where the employer adopts one pre-approved document from one provider who is ultimately bought out by another)