Newsbytes
September 2003
IRS Reminds Businesses of Retirement Plan Deadline
IR-2003-109, Sept. 15, 2003
WASHINGTON
— 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, 2003, 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 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.”
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, or call customer
account services toll-free at 1-877-829-5500
