Based on numerous requests for plan documents from public agency clients, we know that many cannot find complete sets of their historical and current retirement plan documents that are properly authorized, signed and dated. If this sounds like you, here’s what you need to know.
Retirement plans are like continuing stories or novels that build on earlier chapters. Because a retirement plan (401(a), 403(b) or 457(b)) is, until formally terminated, an organic “living” document, it must be properly adopted and amended to reflect both employer-initiated design changes and IRS-mandated changes to reflect legislative/regulatory requirements.
There are specific deadlines by which these changes need to be adopted to be compliant. While each amendment and each restatement of the plan must be properly authorized (that is, approved by the body or entity with amendment authority), it must also be timely executed and dated by an appropriate and authorized representative of the sponsor. If any of these things are not done, a gap in the plan’s story is created and the plan arguably violates the general requirement that it must be operated in accordance with its terms. The failure to timely adopt IRS-mandated amendments can also potentially disqualify your plan.
Here are a few best practices to consider:
- Keep a separate, clearly marked binder for plan documents and indicate that it is not to be discarded or destroyed.
- Make sure that all plan documents, amendments and restatements are timely dated and executed. Keep a set of originals, if possible. If you are not sure whether a plan document was timely or properly executed, discuss it with legal counsel to ensure it is in compliance.
- File plans with a detailed table of contents and in reverse chronological order (the most recent plan documents on top).
- Keep any plan summaries, and IRS determination letters or opinion letters, in your binder with an indication as to which version of the plan they relate to.
If you find that there are amendments ,signatures or dates missing, discuss this with your employee benefits counsel. Although there may be serious consequences of not having the appropriate documents “on file” and available, there are ways to fix and address these problems.
A little “tidying-up” of your plan records can save you big headaches in the future.
Jeff Chang is a partner at Best Best & Krieger LLP. He has four decades of experience skillfully evaluating benefit and retirement plan compliance to achieve maximum outcomes for public agency clients throughout California. He can be reached at firstname.lastname@example.org or (916) 329-3685.