The Internal Revenue Service today reminded approximately 750,000 small and
mid-size businesses using off-the-shelf retirement plan documents
that they must update their plans by Sept. 30 to maintain the tax benefits.
Businesses that act after the deadline must pay a compliance fee to avoid loss
of tax benefits.
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 so-called
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.
Employers who fail to amend their plans by Sept. 30, 2003, must apply for a
determination letter to avoid plan disqualification, and, under the Revenue
Procedure 2003-72, they will also have until Jan. 31, 2004, to apply. But they
must pay a $250 compliance fee with their application.
Paul Shultz, director of IRSs Employee Plans Rulings & Agreements,
said, Weve heard from the benefits community about the pressure
that the fast-approaching deadline will cause on employers, especially small
business owners. Were trying to encourage employers to act now and contact
their plan sponsors.
Both businesses and their employees enjoy tax benefits from retirement plans
that are in compliance with the law. Failure even inadvertent failure
to act by the deadline could cost a retirement plan tax-favored status.
Employers or plan sponsors in need of more information should visit the Retirement
Plans Web page at www.irs.gov/ep,
or they can call customer account services toll-free at 1-877-829-5500.