ASCi Fall 2009 Newsletter

In this issue:

Interim Amendments – What needs to be done this year?

With most plan providers knee-deep in the process of restating their defined contribution plans for EGTRRA (and subsequent guidance), there is still a lot of confusion about what additional amendments are required and when they have to be adopted. We are continuing to add interim amendments to the DGEM system to allow users to automatically generate the appropriate interim amendments for their clients. (For employers that are still on a Version 1 ASCi document or have not yet been restated from their prior provider to a Version 2 ASCi document, see the discussion under Timing of Interim Amendments for a list of all required interim amendments that should have been adopted for such plans.) The following discusses the additional interim amendments that are being added to the DGEM System for 2009:

PPA Amendments for DC Plans

All defined contribution plans must be amended to comply with PPA by the end of the 2009 Plan Year. The Version 2 ASCi Defined Contribution Plans generated from the DGEM System contain Interim Amendment #2 which complies with all of the requirements under PPA. Thus, any employer that is restated onto a Version 2 Defined Contribution Plan prior to the end of the 2009 Plan Year need not worry about additional PPA amendments However, for employers that do not restate their plans onto a Version 2 document by the end of the 2009 Plan Year, an interim amendment will be required for their existing documents, whether those documents are on a Version 1 ASCi document or are on a plan document of another provider. To allow those plans to be updated for PPA, we are going to be providing a stand-alone amendment on the Download page for plans that are not restated onto a Version 2 ASCi document by the end of the 2009 Plan Year. While we would encourage everyone to have all plans restated by the end of 2009, we understand this may not be possible in all cases. While there is a possibility the IRS could extend the PPA deadline until April 30, 2010 (to coincide with the restatement deadline for prototype and volume submitter plans), IRS has informally stated such an extension is not likely. If the IRS does not extend the PPA amendment deadline, employers that are not restated onto a Version 2 ASCi document by the end of the 2009 Plan Year will have to adopt a PPA amendment prior to restating their documents onto the ASCi document. We will provide a generic stand-alone amendment on the Download page that will be available for users who do not complete the restatement process by the end of the 2009 plan year.

PPA Amendments for DB Plans

For defined benefit plans, a PPA amendment will be required by the end of the 2009 Plan Year. Currently, the ASCi defined benefit document is being reviewed by the IRS and we are expecting to receive our favorable advisory letter later this year or early next year. In either case, the approved version of the DB plan will probably not be available in time to adopt PPA amendments. We have already added a DB PPA amendment to the Download Page. This amendment also includes the reasonable Normal Retirement Age requirements, the PFEA amendments, the final 415 amendments, and the new funding rules. This amendment is available to be used with plans on the DGEM system and plans that have not yet been converted to DGEM.

HEART/WRERA Amendments

Although the Version 2 ASCi documents have been updated for all interim amendments required through the end of the 2009 Plan Year, we are going to be adding another snap-on amendment to the ASCi documents to address the HEART Act amendments, the WRERA amendments (including the waiver of the RMD rules for 2009), the final regulations for automatic contribution arrangements and the Midwest Disaster Recovery relief provisions under the Emergency Economic Stabilization Act of 2008 (EESA). These amendments generally must be adopted by the end of the 2010 Plan Year (HEART Act, Midwest Disaster Recovery) or the end of the 2011 Plan Year (WRERA). However, to allow users to provide these amendments as part of the plan document and to provide guidance as soon as possible to clients, we are going to be adding the snap-on amendment in our October upgrade. We will be offering two separate amendments on the DGEM system to accommodate these interim amendments.
  • We will be adding a new Appendix D – Interim Amendment #3 to the basic plan document and a new snap-on amendment to the Adoption Agreement addressing the elective provisions under the HEART Act, WRERA and other guidance. We will be updating the DGEM checklist to add new questions to feed into the elective provisions under the Interim Amendment. (As with other interim amendments, this interim amendment will contain default selections that can be adopted at the sponsor level without needing any employer signature.)
  • For plans restated prior to the date the updated documents are on the system, we will be providing a pre-populated form containing the HEART Act, WRERA and other provisions that can be generated automatically for all plans adopted prior to the date the interim amendments are available on the system. The amendment will include a cover letter and SMM and will be a sponsor-level amendment that does not need an employer signature (unless the employer elects one of the elective provisions in the amendment).
If you have any questions regarding the required interim amendments under the DGEM system, please contact us at asci@asc-net.com.

List of Interim Amendments

We have received a number of questions regarding the timing of required interim amendments and whether those amendments are contained in the ASCi plan documents. Under the IRS’ pre-approved program for prototype and volume submitter plans, we submitted the ASCi documents for approval by the deadline of January 31, 2006. The ASCi plans (as all pre-approved plans) were submitted under the 2004 IRS Cumulative List which set forth the applicable provisions that could be included in the documents at the time of submission. Since we submitted those documents, the IRS and Congress have issued additional guidance and legislation that must be adopted by prototype/VS plans (even though they are still in the restatement process). To assist in unraveling the complex interim amendment deadlines, we have created a chart listing the various deadlines for adopting interim amendments and how those interim amendments were handled under the DGEM System.
Interim Amendments for Defined Contributions Plans = 2006 – 2009
Amendment Amendment Deadline DGEM System
Roth Amendment Discretionary amendment required by end of plan year in which Roth Deferrals were first accepted under Plan The Roth provisions were included in Version 1 documents on the DGEM system. Thus, anyone adopting an ASCi document had the option of electing Roth Deferrals. For plans not on the DGEM system, we created a Roth Amendment Wizard that allowed users to create amendments for non-ASCi plans.
401(k) and 401(m) Final Regulations Last day of 2006 plan year The 401(k)/(m) provisions were included in Version 1 documents on the DGEM system adopted after May 1, 2006. Thus, anyone adopting an ASCi document after May 1, 2006 complied with the 401(k)/(m) final regulations. For plans not on the DGEM system (or adopted prior to May 1, 2006), we created a 401(k)/(m) Amendment Wizard that allowed users to create a separate amendment for those plans.
Final 415 Regulations For calendar year plans = later of December 31, 2008 or extended due date for filing 2008 tax return. For fiscal year plans = later of last day of plan year that includes first limitation year beginning on or after July 1, 2007 or extended due date for filing tax return for tax year that includes such date. Special rules apply if plan is maintained by more than one employer. The final 415 regulation amendments were not included in Version 1 documents. A snap-on amendment was added to all Version 2 documents. Thus, if you have adopted or restated onto a Version 2 document on the DGEM system, the plan complies with the Code §415 regulations. For plans not on Version 2 documents, we created an Interim Amendment Wizard that allowed users to create a separate 415 amendment. The Wizard was available in December of 2007.
Hurricane Relief Last day of 2007 plan year The Hurricane relief provisions were only required for Plans utilizing the special relief provisions for EEs affected by Katrina, Wilma or Rita. The Hurricane Relief provisions were included for all Version 2 documents. We included the Hurricane Relief provisions in the Interim Amendment Wizard for the Code §415 changes.
PPA Amendment Last day of 2009 plan year The PPA amendments were not included in Version 1 documents. A snap-on amendment was added to all Version 2 documents. Thus, if you have adopted or restated onto a Version 2 document on the DGEM system, the plan complies with the PPA regulations. For plans not on Version 2 documents by the end of the 2009 plan year, we will be adding a generic PPA amendment on the Download page that can be adopted for any non-Version 2 clients. (Plans that are restated by the end of the 2009 plan year do not need to adopt the separate PPA amendment.)
Reasonable Normal Retirement Age Due date of tax return for first tax year beginning after June 30, 2008 The amendment for reasonable normal retirement age is included in the PPA amendments.
HEART Act / WRERA / EACA / QACA / Midwest Disaster Recovery HEART Act and Midwest Disaster Recovery = end of 2010 plan year WRERA = end of 2011 plan year. Interim amendments to comply with the HEART Act, WRERA (including the waiver of the RMD rules for 2009), the final regulations for automatic contribution arrangements and the Midwest Disaster Recovery relief provisions under the Emergency Economic Stabilization Act of 2008 (EESA) will be added to the DGEM system in our October upgrade.

Your responsibilities as a Named Prototype and/or Volume Submitter Sponsor

As a “named sponsor” you have received opinion (prototype) and/or advisory (volume submitter) letters with your company specifically named as the plan sponsor. The IRS procedures applicable to prototype and volume submitter sponsors mandate that you adhere to certain requirements to ensure that your sponsored plans and your clients continue to receive the benefits of pre-approved plans. ASC Institute (ASCi), as a mass submitter, can assist you in conforming to these requirements. However, as the named plan sponsor, you are responsible for ensuring compliance with the requirements. These requirements are set forth under IRS Revenue Procedure 2005-16. This article summarizes these requirements. We highly recommend that you review Rev. Proc. 2005-16. The failure to comply with the requirements of Rev. Proc. 2005-16 could result in the loss of eligibility to sponsor a prototype and/or volume submitter plan and the revocation of your approval letters. The IRS requirements are essentially the same for prototype plan sponsors and volume submitter plan sponsors. However, they do vary slightly. As a DGEM user, you may be a prototype plan sponsor, a volume submitter plan sponsor or both. Therefore, we will separately discuss the requirements for each type of sponsor.

Responsibilities of Prototype Sponsors

If you are a prototype sponsor, you have the following responsibilities:
  • Material furnished to adopting employers – You must provide to each adopting employer a copy of the approved plan, copies of subsequent amendments and the appropriate IRS opinion letter for the plan the employer adopts.
  • A prototype sponsor (and, in some instances, the adopting employer) must amend the approved prototype plan if the provisions of such plan fail to continue to meet the requirements of the law, regulations or other IRS guidance. (ASCi will provide “interim” amendments as needed.) In certain cases, adopting employers will need to operate the plan in compliance with a change in the law or regulations even before the prototype plan is amended to reflect the change
  • Prototype sponsors must make “reasonable and diligent” efforts to ensure that, to the best of the sponsor’s knowledge, each adopting employer continues to maintain the plan as a prototype plan and amends the plan when necessary.
  • If a prototype sponsor reasonably concludes than an adopting employer’s prototype plan may no longer be qualified and the prototype sponsor does not or cannot submit a request to correct the qualification failure under the IRS EPCRS program, the sponsor must notify the employer that adverse tax consequences may result from the loss of the plan’s qualified status and inform the employer of the availability of the EPCRS program.
  • A prototype sponsor must inform the IRS in writing of a prototype plan that is no longer used by “any” employer and which the sponsor no longer intends to offer for adoption.
  • A prototype sponsor that intends to “abandon” a plan must inform each adopting employer that the form of the plan has been terminated, that the plan will become individually designed (unless the employer adopts another pre-approved plan) and that any employer reliance will not continue if there is a change in law or other qualification requirement. The prototype sponsor then must notify the IRS that it has abandoned the plan.
  • Recordkeeping requirements – A prototype sponsor must maintain for each of its plans a record of the names, business addresses, and taxpayer identification number of all employers that have adopted the prototype plan. (The sponsor need only keep this information for three years for any employer that ceases to maintain the plan.) Upon written request, the sponsor must provide to the IRS a list of the employers that continue to maintain the plan and any employers that the sponsor knows has ceased to maintain the plan. (The ASCi DGEM system will keep the historical record of any plan placed on the DGEM system.)
  • A prototype sponsor must resubmit its plans for IRS approval on the six-year cycle applicable to prototype plans. For defined contribution plans, the next cycle ends January 31, 2012. For defined benefit plans, the next cycle ends January 31, 2015.

Responsibilities of Volume Submitter Sponsors

If you are a volume submitter sponsor, you have the following responsibilities:
  • Material furnished to adopting employers – You must provide to each adopting employer a copy of the approved plan, copies of subsequent amendments and the appropriate IRS advisory letter for the plan the employer adopts.
  • A volume submitter sponsor (and, in some instances, the adopting employer) must amend the approved volume submitter plan if the provisions of such plan fail to continue to meet the requirements of the law, regulations or other IRS guidance. In certain cases, adopting employers will need to operate the plan in compliance with a change in the law or regulations even before the volume submitter plan is amended to reflect the change. (ASCi will provide “interim” amendments as needed.)
  • Volume submitter sponsors must make “reasonable and diligent” efforts to ensure that, to the best of the sponsor’s knowledge, each adopting employer continues to maintain the plan as a volume submitter plan and amends the plan when necessary.
  • If a volume submitter sponsor reasonably concludes than an adopting employer’s volume submitter plan may no longer be qualified and the volume submitter sponsor does not or cannot submit a request to correct the qualification failure under the IRS EPCRS program, the sponsor must notify the employer that adverse tax consequences may result from the loss of the plan’s qualified status and inform the employer of the availability of the EPCRS program.
  • Recordkeeping requirements – A volume submitter sponsor must maintain for each of its plans a record of the names, business addresses, and taxpayer identification number of all employers that have adopted the volume submitter plan. Upon written request, the sponsor must provide to the IRS a list of the employers that adopted the plan. (The ASCi DGEM system will keep the historical record of any plan placed on the DGEM system.)
  • A volume submitter sponsor must resubmit its plans for IRS approval on the six-year cycle applicable to volume submitter plans. For defined contribution plans, the next cycle ends January 31, 2012. For defined benefit plans, the next cycle ends January 31, 2015.

Your responsibilities as a DGEM User when ASCi is the Named Sponsor

If you are a DGEM user that uses ASC Institute (ASCi) as the “named sponsor” of the prototype and/or volume submitter plans you are using for your employer-clients, you have certain responsibilities to assist ASCi in complying with the IRS procedures applicable to pre-approved plan sponsors. If the IRS has not issued prototype (opinion) letters and/or volume submitter (advisory) letters with your company named as the plan sponsor, you must use the plans sponsored by ASCi. By using ASCi as the named sponsor, you have access to all prototype and volume submitter plans on the DGEM system. These include the following defined contribution plans:
  • Volume Submitter Profit Sharing/401(k) Plan (adoption agreement format)
  • Volume Submitter Profit Sharing Plan
  • Volume Submitter Money Purchase Plan
  • Volume Submitter “Traditional” Profit Sharing/401(k) Plan (appendix format)
  • Prototype Nonstandardized Profit Sharing/401(k) Plan
  • Prototype Nonstandardized Profit Sharing
  • Prototype Nonstandardized Money Purchase Plan
  • Prototype Standardized Profit Sharing/401(k) Plan
  • Prototype Owners-Only 401(k) Plan
If you are using plans with ASCi as the named sponsor, you have the following responsibilities:
  • Material furnished to adopting employers – You must provide to each adopting employer a copy of the approved plan, copies of subsequent amendments and the appropriate IRS opinion or advisory letter for the plan the employer adopts.
  • You must ensure that adopting employers amend the approved prototype or volume submitter plan if the provisions of such plan fail to continue to meet the requirements of the law, regulations or other IRS guidance. (ASCi will provide “interim” amendments, as needed, but you will have responsibility for timely mailing and execution (if necessary).)
  • You will need to inform your adopting employers of any change in the requirements for the pre-approved plan they are using. Note that in some circumstances, an employer may need to operate in compliance with new laws or other guidance prior to the time the plan must be amended to reflect the change.
  • You must make “reasonable and diligent” efforts to ensure that, to the best of your knowledge, each adopting employer continues to maintain the plan as a prototype or volume submitter plan and amends the plan when necessary.
  • If you reasonably conclude than an adopting employer’s plan may no longer be qualified, you must notify the employer that adverse tax consequences may result from the loss of the plan’s qualified status and inform the employer of the availability of the EPCRS program.
  • You must notify ASCi immediately if you intend to terminate ASCi as your document provider. Failure to pay appropriate DGEM fees will result in the assumption that you intend to cease using the ASCi sponsored plans. ASCi may then assist the adopting employers with the switch to another service provider.
  • Recordkeeping requirements – You must keep a record of the names, business addresses, and taxpayer identification number of all employers that have adopted the ASCi-sponsored plans. (The ASCi DGEM system will keep the historical record of any plan placed on the DGEM system.)

How to correct a failure to provide Safe Harbor 401(k) Notices

Under a safe harbor 401(k) plan, an employer must provide employees with an annual notice describing the safe harbor contribution and other features of the plan. The safe harbor notice generally must be provided to employees within a reasonable period before the beginning of each plan year. For this purpose, a notice will be deemed to be provided on a timely basis if the safe harbor notice is provided within 30 – 90 days prior to the beginning of the plan year. Although the IRS has a voluntary correction program (EPCRS) for qualified plans, until recently, the IRS has not provided any guidance regarding how to correct a failure to timely provide the safe harbor notice. The IRS has generally stated that the failure to provide the safe harbor notice is a disqualifying defect without providing any clear guidance on how to correct the defect. However, in its Fall 2008 Employee Plans newsletter, the IRS has provided a suggested method for correcting a failure to provide the safe harbor notice. The IRS Employee Plans newsletter describes two distinct fact patterns with significantly different corrections. In the first example, an employee did not defer into the Plan during the year and never received any notice of her right to defer. The IRS’ suggested correction provides that in such cases an employee should be treated like an employee who was improperly excluded from the Plan. Using the recommended correction principles from the EPCRS program, the newsletter provides that the employer should make a qualified nonelective contribution (QNEC) on behalf of the employee to make up for her lost deferral opportunity. The QNEC is 50% of the missed deferral opportunity for the portion of the year for which the employee is improperly excluded from the Plan. For a safe harbor 401(k) plan providing a safe harbor matching contribution, the missed deferral opportunity is the greater of 3% or the highest rate of deferrals at which the employee would receive a 100% matching contribution. In addition, the employer also must make up the missed matching contribution based on the full amount of deferrals the employee would have made to receive the 100% matching contribution. For example, suppose the Plan provides for an enhanced safe harbor matching contribution equal to 100% of salary deferrals up to 4% of compensation. The employee earns compensation during the year of $20,000. The lost deferral opportunity for the employee would be $800 [4% x $20,000]. Therefore, the employer would owe the employee a QNEC of $400 [50% x $800] plus a matching contribution of $800 [100% x $800]. The contribution would also have to be adjusted for earnings. The second fact situation involves an employee who was already deferring into the Plan and was aware of her ability to continue deferring into the Plan. The IRS Newsletter states that the failure to provide the employee with a safe harbor notice “did not prevent her from making an informed timely election to change (or maintain) her elective contribution to the plan.” As a result, the IRS’ suggested correction in this case is to do nothing – the failure to provide the safe harbor notice does not result in a disqualifying defect. However, the employer must correct its administrative procedures to make certain the notice is provided on a timely basis in the future. According to the suggested correction under the IRS Newsletter, it would appear that no correction would be required for employees that are already deferring into the plan or are aware of their rights to defer under the plan. It is unclear from the suggested correction procedure what would be required to demonstrate that an employee understands their right to defer under the Plan. For example, if an employee is provided an SPD and has received a safe harbor notice in prior years, presumably the failure to provide a safe harbor notice in a subsequent year would not require any correction with respect to that employee (as long as the safe harbor matching contribution had not increased from prior years). Thus, it would appear that correction would only be required for new employees who had not received an SPD and prior safe harbor notices. (Of course, if plan information is provided to the employee at the time of hire, it can be argued that no correction is required even if the employee never receives a safe harbor notice.) Obviously, the easiest way to avoid this problem is to provide the safe harbor notices on a timely basis each year. In addition, procedures should be in place to ensure the safe harbor notices are provided in a timely fashion. The DGEM system can be used to create batch customized safe harbor notices for all safe harbor 401(k) plans stored on the DGEM system. In addition, the DGEM system can be used to document on a plan-by-plan basis whether safe harbor notices have been generated for a particular plan.

2010 Safe Harbor Notices

With the release of the 2010 Safe Harbor Notices, we have received a number of questions regarding how best to utilize the DGEM system to create 2010 Safe Harbor Notices. The following are a list of some of the questions we have received. 1. What is the best way to create batch notices for all of our safe harbor plans? There are two ways to create safe harbor notices on the DGEM system – either as a pre-populated form using the Find feature or as an individual notice using the pre-populated form feature. The DGEM system will no longer accommodate the Safe Harbor Notice Wizard or the New Document checklist approach.   To create multiple safe harbor notices for your plans using the Find feature:
  1. On the DGEM top bar, click Find.
  2. Select a document type, status and version and click Next.
  3. Use the checklist to narrow your search to Safe Harbor plans.
  4. In the Search Results box, select the plans for which you want to generate Safe Harbor notices.
  5. From the dropdown list, select Pre-populated Forms and click Next.
  6. From the list of available forms, select Notice of Safe Harbor Contribution – 2010.
  7. Click Generate Forms.
  8. Click View & Print Document. The notices appear in a new browser window.
To create a single safe harbor notice for a specific plan:
  1. On the client’s Manage Documents page, select a PS/401(k) plan.
  2. From the dropdown list, select View Pre-populated Forms and click Next.
  3. From the list of available forms, select Notice of Safe Harbor Contribution – 2010.
  4. Click Generate Forms.
  5. Click View & Print Document. The notice appears in a new browser window.
2. What if we do not have all our safe harbor plans restated onto the DGEM system? If you have not restated all of your plans onto the DGEM system, you can still generate safe harbor notices for those plans without having to completely restate the document. Simply add the plan to the DGEM system and answer the following checklist questions:
Types of Contributions
AA §1-1 Employer Name
AA §2-1 Plan Name
AA §2-7 Plan Administrator
6A-5 Roth Deferrals
6A-7 Change or Revocation of Deferral Election
6A-8 Automatic Deferral Election
6C-2 Safe Harbor Contribution
6C-3 Eligibility Conditions for Safe Harbor Contribution
8-2 Normal Vesting Schedules
8-3 Top Heavy Vesting Schedules
10-1 Availability of In-Service Distributions
C-1 Are Participants Permitted to Direct Investments?
Once you have completed the above questions, you can generate safe harbor notices either on a single plan basis or on a batch basis using the Find feature without completely restating the document. 3. We have a number of plans using the supplemental “maybe” notice for safe harbor employer contributions. Is there a way to differentiate between plans that will or will not be providing the prior year contribution or those for a first year plan? We are looking at options to allow users to select a different alternative for plans using the “maybe” notice. The problem is that when generating batch notices, there is no checklist question to alert the system as to which notice needs to be provided. The default notice provides that the employer contribution will be made for the prior year (2009) and may be provided for the current year (2010). For plans not wishing to provide the contribution for the 2009 plan year or if 2010 is the first year of the Plan, we will be providing alternative supplemental notices that can be created on a plan-by-plan basis. 4. By what date must the 2010 safe harbor notices be provided to participants. What if an employer fails to timely deliver the safe harbor notices? The safe harbor notices must be provided to participants within a reasonable period of time prior to the beginning of the plan year. For this purpose, a plan is deemed to satisfy this requirement if the notices are provided between 30 – 90 days prior to the beginning of the plan year (October 1 – November 30 for calendar year plans). However, if the safe harbor notice is not distributed by November 30, it may still be reasonable to provide the notice during December. We generally recommend that if notices are not provided until later in December that the notices be handed out directly to participants (preferably as part of an employee meeting discussing the merits of the safe harbor 401(k) plan) so an argument can be made that the notices were still provided within a reasonable period of time prior to the beginning of the plan year. If the safe harbor notices are not provided within a reasonable period of time prior to the beginning of the plan year, the IRS treats the plan as disqualified. See the article under “How to correct a failure to provide Safe Harbor 401(k) Notices” in this Newsletter for a detailed discussion of IRS guidance concerning the correction of a plan that does not provide safe harbor notices on a timely basis. 5. When we try to generate an automatic contribution notice for our safe harbor 401(k) plan, we receive an error message. Why? Under the DGEM system, we allow a plan to provide safe harbor notices and automatic contribution notices automatically based on the selections made in the plan document. If a plan has both safe harbor provisions and automatic contribution provisions, the safe harbor notice incorporates both the safe harbor notice requirements and the automatic contribution notice requirements. Therefore, the system does not allow such plans to generate a separate automatic contribution notice since that notice has already been generated under the safe harbor notice. 6. Which notice should we use if the plan is on a fiscal plan year? The safe harbor notices and automatic contribution notices are provided for the 2010 plan year. For this purpose, the 2010 plan year is any plan year beginning in 2010. Therefore, you may continue to use the 2010 safe harbor and automatic contribution notices for all plan years beginning in 2010.

Keep up to date with ERISA Current Developments One-Day Seminars

Join our One-Day seminars with Charles Lockwood and gain a unique insight into many of the issues facing employers and TPAs in our current economic environment. Our upcoming seminars will take place in Los Angeles (Nov 10th) and in Houston(Nov 17th). Take advantage of the early bird registration and get a $50 discount off the registration fee. Seminar Topics to Include:
  • Recent Retirement Plan Guidance from the Internal Revenue Service and Department of Labor
  • Dealing with Retirement Plans in a Down Economy
  • Handling Rehired Employees
  • Using New Comparability Plans to the Employer’s Advantage

Frequently Asked Questions

To assist users in answering some of the more common questions, we have added a FAQ section to the DGEM system. You can access the FAQ section from the menu at the bottom of any page within the DGEM system. The following are a few of the most recent FAQs added to the DGEM system. 1. 2010 Safe Harbor notices Question: When will updated safe harbor notices be available for the 2010 Plan Year? Answer: All safe harbor notices may be generated using the pre-populated forms feature. There will no longer be a Wizard or New Document checklist to generate safe harbor notices. As in the past, users can utilize the Find feature to identify all safe harbor 401(k) plans and generate customized safe harbor notices (and cover letters) on a batch basis. See the article “Generating 2010 Safe Harbor Notices under DGEM” in this Newsletter for more information. 2. Merger of Plans Question: If two plans are being merged prior to restatement, must each plan be separately restated prior to the merger? Answer: If two plans are being merged, they do not each have to be restated prior to the merger. When a plan is restated, the ASCi plan automatically applies the EGTRRA provisions to the prior plan — regardless of the effective date of the restatement. This is true for merged plans as well. When the merged plan is restated onto the ASCi document, both plans should be listed on the Employer Signature Page as plans being replaced. This will allow the EGTRRA provisions to apply to both prior plans so that each plan is properly amended for EGTRRA. The following language comes from Section 14.01(d)(3) of the BPD:
(3) Merged plans. Except for retroactive application of the EGTRRA provisions pursuant to subsection (2) above, if one or more qualified retirement plans have been merged into this Plan, the provisions of the merging plan(s) will remain in full force and effect until the Effective Date of the plan merger(s), unless provided otherwise under Appendix A of the Adoption Agreement.
Therefore, the EGTRRA provisions automatically apply to the prior plans even though the provisions of the pre-merged plans apply through the effective date of the restatement. If any special provisions apply to the plans, those special provisions can be described in Appendix A: Special Effective Dates. 3. 5300/5307 Package Question: Will the DGEM System have a 5300/5307 module to allow users to create a determination letter package for documents created on the system? Answer: Yes. The DGEM System will be updated by the end of October to provide a 5300/5307 module that will allow users to create a customized determination letter package. The module will provide for the creation of the Form 5300/5307 (as a fillable form), the Notice to Interested Parties, the List of Modifications (if the Volume Submitter Plan is modified), the Form 2848 and the user fee form. 4. Plan Termination Amendment Question: May the 2009 termination amendment currently on the Download Page be used with Version 2 Defined Contribution Plan documents? Answer: Yes. However, the termination amendment does contain duplicative provisions since the termination amendment has PPA and Code §415 language (as does the Version 2 documents). While there is nothing wrong with providing duplicative language, we have added to the Download Page a stripped-down version of the termination amendment for plans that have been restated on the Version 2 document.