Washington (Sept. 16, 2003) -- Approximately 750,000 small and mid-size businesses using “off-the-shelf” retirement plan documents must update their plans by Sept. 30, 2003, to maintain the tax benefits, according to the Internal Revenue Service. If they act after the deadline they must pay a compliance fee to avoid loss of tax benefits. Failure - even inadvertent failure - to act by the deadline could cost a retirement plan tax-favored status.
The Sept. 30 deadline applies to small businesses that obtain certain IRS approved “off-the-shelf” plan documents from plan sponsors, such as banks, brokers, insurance companies, lawyers or consultants. The plans are the Master & Prototype (M&P) plans and Volume Submitter plans. Even though such plans are approved and sponsors have updated them, businesses must still formally adopt the updated plans by Sept. 30. To do so, businesses should contact their plan sponsor.
Some M&P and Volume Submitter plans must also file determination letter requests in order to keep their plans in compliance with the law. In Revenue Procedure 2003-72, the IRS extended the deadline for filing a determination letter request to Jan. 31, 2004, for employers who adopt their plan amendments by the Sept. 30, 2003, deadline.
Paul Shultz, director of IRS’s Employee Plans Rulings & Agreements, said, “We’ve heard from the benefits community about the pressure that the fast-approaching deadline will cause on employers, especially small business owners. We’re trying to encourage employers to act now and contact their plan sponsors.”
-- WebCPA staff
