Plan Document Failures: A Reminder That All Is Not Lost

John Iekel

Plan documents, and compliance with the rules and regulations governing them, can be complicated and are always important. An industry expert in a recent ASPPA webinar outlined what can be done if one has made an error with one. 

John P. Griffin, JD, LLM Principal at the ASC Institute, reminds that the IRS provides mechanisms by which one can correct plan document errors. It is important to take action if a mistake has been made, he cautioned, remarking, “Plan document failures are considered a ‘significant’ failure.” 

Correction Under the SCP

Revenue Procedure 2021-30 allows for self-correction in certain situations. This applies to 403(b) plans, Griffin says. 

Plan document failures are considered a “significant” failure that must be corrected within the three-year correction period, Griffin notes. A plan must have a “favorable letter.” 

Griffin reminds that the IRS self-correction program (SCP) is not available to correct a failure to adopt an initial written 403(b) plan within the required timeframe. In addition, he says, the late adoption of discretionary amendments is not considered a plan document failure. 

Missed Restatement Deadlines

For 403(b) plans, the restatement deadline is long gone—it was June 30, 2020. 

Griffin points out that if that deadline has been missed, the IRS provides remedies. And the IRS itself provided a reminder in the Employee Plans Newsletter of May 23, 2022, which addressed the impact of missed deadlines for restatement of pre-approved plans. 

Simply failing to qualify as a pre-approved plan is not a qualification issue, the IRS says. But if a plan is pre-approved, there are certain rules that apply. For instance, if a pre-approved plan is not timely amended by the restatement deadline, it becomes an individually designed plan (IDP). 

If a 403(b) plan misses a restatement deadline, Griffin notes, the following points apply:

• Under the favorable letter requirement, if a written plan was not adopted by 2009 and was adopted later, the plan should state the year it was adopted.
• The SCP is available if the defect existed for less than three years; the voluntary compliance program (VCP) is to be used to correct older mistakes.