In the Winter 2009 Edition of Employee Plan News, hot off the presses today, the IRS gives us a number of items to make note of:
1. There is a new address for Determination Letter Applications using Form 5307, 5300, 5310 and 5310-A. It is:
-
Internal Revenue Service
PO Box 12192
Covington, KY 41012-0192
It states that applications mailed prior to the change will be redirected to the correct address.
2. Since Cycle C ends on a Saturday, the IRS is extending the deadline for submitting Cycle C determination letter applications to Monday, February 2, 2009. Fans of Punxsutawney Phil will recognize February 2nd as it is also Groundshog Day. The official website of the Punxsutawney Groundhog Club contains a handy countdown clock to the Cycle C deadline. According to the Groundhog Day clock, Cycle C’s deadline is 45 days and counting.
3. Any end-of-the-year office cleaning should not include sending pre-merge plan documents to the circular file or recycling bin. The IRS reminds us that EP Determination specialists routinely verify a plan’s compliance with prior legislation, such as GUST, and the scope of verification may extend to plans that were merged into the plan applying for a determination letter. For merged plans, or plans containing assets transferred into a plan as the result of a merger, acquisition, or consolidation involving one or more corporations or other business entities, a determination letter application filed for a post-merger plan must include a copy of the pre-merged plan’s determination letter and/or plan amendments which confirm that the pre-merged plan was qualified when it was merged into the surviving plan. Otherwise, the IRS will return the application to the sponsor as incomplete.
4. Earlier this week, an actuary friend of mine called about a letter he received from the IRS about one of his determination letter applications. The letter was about the difference between “separation from service” and “severance from employment” when defining the Top-Heavy Ratio. According to this edition of Employee Plan News, he is not alone. In the section on “Common Plan Language Errors”, it states:
- “All plan types frequently contain an incorrect definition of Top-Heavy Ratio. Distributions made to a participant during the one-year period ending on the determination date must be added to the present value of the cumulative accrued benefit. However, if a distribution is made for a reason other than severance from employment, death, or disability, the five-year look back period is used. Often, plans incorrectly refer to “separation from service” but should instead refer to “severance from employment”.
[tag]pension protection act, ppa, IRS, Groundhog Day, top-heavy ratio, ERISA[/tag]
