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CONTINENTAL
QUARTERLY |
SPECIAL EDITION FALL 2003 |
Un-timely GUST Restatements –
Restoring Plan's Tax-qualified Status
By: George M. Morrison, Esq.
Sponsors of plans using prototype or volume-submitter
documents had until September 30, 2003 to adopt a GUST-restated plan
document. Sponsors of plans using
individually-designed documents generally had until February 28, 2002 to restate
for GUST. Failure to have timely
adopted a GUST restatement threatens the tax-qualified status of the plan. The IRS, however, recently issued a revenue
procedure which enabled sponsors who failed to adopt the necessary amendments
additional time to do so (See Rev. Proc. 2003-72). Under the new procedure, sponsors have until January 31, 2004 to
adopt a GUST-restated plan document provided: (i) the plan is submitted
by that date for a determination letter (even if not otherwise required to do
so); and (ii) a $250 user fee is paid in addition to the user fee otherwise
payable with such application (generally $125).
A sponsor of a plan not timely amended for GUST can correct such failure by making a
submission under the IRS’ Voluntary Compliance Program (“VCP”) which is part of
the IRS’ Employee Plans Compliance Resolution System. Correction under VCP generally requires a submission to the IRS and the
payment of a VCP fee. The VCP fee is
based on the number of participants and is as follows:
|
# of Participants |
VCP Fee |
|
less
than 20 |
$ 750 |
|
21
to 50 |
$ 1,000 |
|
51
to 100 |
$ 2,500 |
|
100 to 500 |
$ 5,000 |
|
501 to 1,000 |
$ 8,000 |
|
1,001
to 5,000 |
$15,000 |
|
5,001
to 10,000 |
$20,000 |
|
10,001
or more |
$25,000 |
The VCP fee is reduced by ˝ if the matter is submitted within 1-year of the amendment deadline. Thus, if a plan utilizing a prototype or volume-submitter document is amended and submitted under VCP by September 30, 2004, the VCP fee is reduced by one-half.
VCP is available regardless of the type of document utilized (e.g., individually-designed plan documents). VCP is also available to correct additional violations that occurred with respect to a plan. Sponsors which need to utilize VCP should consult with counsel. Certain eligibility requirements apply and VCP involves IRS review and approval.
If you have any questions about GUST, VCP or any of our services, please contact David Hanisco via email or phone (856-667-7818x129).
Nothing contained herein is intended to constitute legal advice. Plan sponsors should seek the advice of competent legal counsel who can consider their specific facts and circumstances. Any sponsor requiring assistance should feel free to contact our office without any obligation.