The IRS issued Announcement 2001-77 in July 2001which extends the GUST Remedial Amendment Period to December 31, 2002, due to the Economic Growth & Tax Relief Reconciliation Act of 2001. Plan sponsors (Employers) have until the later of December 31, 2002 or 12 months after their plan document sponsor (Administrator) receives IRS approval, to adopt and submit their plan to IRS for approval. Employers must complete a Certification to Extend the Remedial Amendment Period prior to December 31, 2001, unless the employer restates their plan using the same administrator that sponsored their current document.

Administrative Retirement Services, Inc. (ARS) will sponsor a plan document and has submitted its documents to IRS for approval and expects to receive approval before year-end. In September ARS will be mailing a Certification to Extend the Remedial Amendment Period and a document questionnaire to begin the restatement process.

Restating your retirement plan is an excellent time to review your plan provisions and make changes to improve your retirement program. Several changes we recommend considering can be found later in this article.

• Add a Cross Tested Contribution Formula. These plans are the hottest planning concepts in qualified plans today. They have an individually designed allocation formula which segregates the employees into two or more employer defined classes, with each class entitled to a separate contribution percent. These plans must demonstrate nondiscrimination by showing that the benefits, as a percentage of current compensation, are not discriminatory. Ask us for a demonstration on how this can benefit your company.

• Add a Safe Harbor or SIMPLE formula. Both SIMPLE and Safe Harbor 401(k) plans allow employers to avoid nondiscrimination and top-heavy testing but require the employer to contribute either a matching or non-elective amount which is 100 percent vested. A timely notice describing employee rights and obligations under the plan must be provided.

• Review plan eligibility. Did you know that you can allow employees to immediately contribute to the 401(k) and wait a year to be eligible for employer contributions (profit sharing and match)?

• Review plan compensation. Does your plan document correctly state what compensation is included for plan purposes? Is your compensation as of date of plan participation or first day of the plan year? Does it include 401(k) contributions? Plan Sponsors have several options and should explore them during this restatement period.

• Review plan loans. Does your document allow loans? Does it limit the number of loans to one or two? Does it charge a proper rate of interest such as prime or prime plus one? After December, 31, 2001, sub chapter S shareholders, partners in partnerships, and sole proprietors of unincorporated businesses can take out loans without the loan being treated as a prohibited transaction.

This is just a sample of the items we will be addressing when we restate plans over the next year. At Administrative Retirement Services, Inc. we believe the preparation of your plan document is the most important aspect of your retirement plan. To discuss your plan provisions and the options available contact Administrative Retirement Services, Inc.

© Administrative Retirement Services, Inc.  2000
Published by Administrative Retirement Services, Inc., E-mail address:  arsinc@prodigy.net.  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.

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