Prototype and volume submitter defined contribution plans (such as profit sharing, 401(k) and money purchase pension plans) must be amended and restated for the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA Restatement) and subsequent legislation and guidance by April 30, 2010.  Employers who maintain a prototype or volume submitter defined contribution plan should have been contacted by their document provider who will provide the required restatement.

In connection with the adoption of the EGTRRA Restatement, employers should also determine whether to request a determination letter from the Internal Revenue Service (IRS) with respect to the EGTRRA Restatement.  The deadline for filing any such request with the IRS is also April 30, 2010.  The IRS filing fee for a determination letter on a prototype or volume submitter plan is generally $300 (or $1,000 if the employer requests a determination relating to the average benefits test or general test relating to coverage and nondiscrimination testing).

IRS Opinion Letters vs. Determination Letters

When the IRS approves a prototype or volume submitter plan document, it issues an opinion letter stating that the form of the plan is acceptable under the Internal Revenue Code of 1986, as amended (the Code).  The opinion letter is not a ruling or determination as to whether an employer's plan qualifies under Code Section 401(a).  However, an employer that adopts the plan may generally rely on the opinion letter with respect to the qualification of its plan as long as the plan, as adopted by the employer, is identical to the approved prototype plan, the employer has chosen only options permitted under the terms of the plan, and the employer has followed the terms of the plan.  However, adopters of prototype and volume submitter plans may not rely on the opinion letter issued on the underlying prototype plan in the following situations:

• If the employer maintains or has ever maintained another qualified plan for some of the same participants, it may not be able to rely on the opinion letter with respect to satisfying the maximum limitations of Code Section 415 or the top heavy requirements of Code Section 416.
• If the employer's plan does not cover 100% of its statutorily eligible employees, it may not rely on the opinion letter with respect to the coverage test.
• If the employer's plan does not elect a safe harbor allocation formula and a safe harbor definition of compensation, it may not rely on the opinion letter with respect to the nondiscrimination tests.
• If the employer has modified the terms of the plan's approved trust in a manner that would cause the plan to fail to be qualified, it may not rely on the opinion letter.

If any of the above situations apply to the employer's plan, or if the employer has adopted the EGTRRA Restatement with superseding or additional provisions, the employer may not rely on the IRS opinion letter with respect to any such provisions or the situations described above.  Obtaining a determination letter will give the employer reliance on any of the above items that are not covered by the opinion letter.  Essentially, a determination letter assures the employer that the plan document, as adopted by the employer, meets the Code's qualification requirements as of the date of such letter.

Additional Benefits of Determination Letters

A determination letter can also be helpful to have in the event of a later merger of the employer's plan into another plan or in the event of plan termination.  For example, if the plan is to be merged into another plan sponsor's qualified plan, that plan sponsor may require an up-to-date determination letter (rather than relying only on the opinion letter that was issued on the underlying prototype or volume submitter plan document) before permitting the merger.  Alternatively, if the plan is later terminated and the employer wishes to obtain a determination letter indicating that the termination of the plan does not affect its qualified status, then the employer would generally only need to submit plan documents back to its last IRS determination letter, rather than all prior plan documents.  Finally, if any plan was merged into the employer's plan, the employer may want to request a determination letter to obtain reliance that the plan that was merged into the employer's plan met the qualification requirements at the time of merger.