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Monday, January 7, 2013
In a surprising turn of events, Rev. Proc. 2013-6, the IRS’s most-recently updated procedure for issuing determination letters on the qualified status of various retirement plans, was revised to eliminate the usage of a working copy of the plan in lieu of an executed plan restatement. Under the IRS’s determination letter procedures, individually designed plans must be restated when they are submitted for determination letter applications. Prior to Rev. Proc. 2013-6, for this purpose, submission of a working copy of the plan in a restated format would suffice as long as the plan sponsor separately submitted the executed amendments that were integrated into the working copy.
The IRS revised Rev. Proc. 2013-6 to remove all language concerning the submission of a working copy. The current language now provides simply that “[i]ndividually designed plans must be restated when they are submitted for determination letter applications.” Period.
In practice, the elimination of the submission of a working document can exact a great burden on plan sponsors. Many plan attorneys craft working copies in lieu of a restated, executed plan document to avoid having to run the document for final execution by their compensation committee or executive committee (i.e., whomever is responsible for amendments to the plan). Compensation committees can consist of many high-level employees who are busy with pressing matters and who, quite simply, may be hard to pin down prior to a determination letter submission (especially because, for many plan sponsors, December and January are busy times of the year). In addition, it is rare that a plan submission comes back without changes required by the IRS. Many plan sponsors and their counsel draft working copies so that they can incorporate the required changes along with interim amendments for one signature, instead of requiring the compensation committee members to re-execute a plan restatement.
Do you think this change will be burdensome for your clients? Does your firm usually submit working copies? Why/Why not?
--Shaun Terrill
Federal Tax Law Editor (Compensation Planning)
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