Changes are regularly made to the federal tax laws that apply to qualified retirement plans described in Internal Revenue Code section 401(a) (“401(a) Plan”). To maintain tax-qualified status, a 401(a) Plan must be amended to include these periodic changes, and every five to six years, a 401(a) Plan must be amended and restated. Otherwise, the participants in the disqualified 401(a) Plan will be taxed on their 401(a) Plan account balances in the year of plan disqualification, rather than later when these accounts are actually distributed.
To allow employers to confirm that their 401(a) Plans comply with applicable federal tax laws, the Internal Revenue Service (“IRS”) established a determination letter program, pursuant to which employers submit their 401(a) Plans to the IRS for review and approval. Should the IRS discover a problem with the document during this review process, the 401(a) Plan can be retroactively amended, thereby maintaining the 401(a) Plan’s tax qualified status.
The IRS has established a staggered system for applying for retirement plan determination letters, with the time for filing an application dependent upon: (1) whether the 401(a) Plan is an individually designed plan or a 401(a) Plan that has been pre-approved by the IRS, e.g., a volume submitter or master/prototype plan that would usually include an adoption agreement and basic plan document and (2) if an individually designed 401(a) Plan, the employer identification number of the plan sponsor/employer. With respect to 401(a) Plans maintained by Indiana public schools, the next applicable dates are:

  • Pre-Approved 401(a) Plans (Volume-Submitter and Master/Prototype Plans): Adopt and sign new 401(a) Plan document no later than April 30, 2016.
  • Individually-Designed 401(a) Plans: Amend, restate and submit the 401(a) Plan to the IRS for review no later than February 1, 2016.

Should you have further questions concerning these requirements, or if you subsequently discover that your school failed to timely adopt its 401(a) Plan and needs assistance seeking special relief from the IRS, please contact Donald Meyer, James Hamilton or Kevin Halloran of the Bose McKinney & Evans LLP Employee Benefits Group.