The CARES Act, passed by Congress and signed by the President in March of 2020, made changes to provisions related to participant loans, distributions, and required minimum distributions. However, the Act requires a Plan Amendment in some cases for an employer to take advantage of these new provisions for their participants. Let’s review the types of documents and agreements that a 401(k) Plan is governed by. Examples of these items can include:
- Basic Plan Document
- Adoption Agreement
- IRS Opinion/Determination Letter
- Summary Plan Description
- Administrative Agreement
- Trust or Custodial Agreement
- Group Annuity Contract
All of these documents (and any additional critical documents for the Plan) should be maintained in a permanent file by the Employer that sponsors the Plan. Although the Plan’s service provider will also maintain copies, it is the responsibility of the Plan to ensure they have copies. The documents should be available for reference by employees involved in Plan Administration, also, to ensure all important provisions are being properly addressed. In the event of a Plan audit by a certified public accountant, the Department of Labor or the Internal Revenue Service, signed copies of all relevant documents will need to be provided. We recommend all Plan Sponsors review their files periodically to ensure these documents are available and that the copies maintained are signed by all required parties. Documents that have not been signed, will not be accepted as executed documents by the regulatory authorities.
We recommend Plan Administrators review the new provisions allowed by the CARES Act. If you would like to make these changes available to your participants, review the Act with your service provider. Determine when you would like to make the amendment effective and begin working on the changes. Discuss any cost associated with these changes with your service provider to ensure you are not surprised with a fee for preparing a Plan Amendment.
Retirement plans can be very complex. As an innovative firm Summit CPA specializes in 401(k) audits. We have the ability to offer assistance entirely off-site with little or no distraction to your daily office routine. We also offer flat-fee pricing so there are no surprises on your bill when the job is complete. For assistance contact our office at (866) 497-9761 to schedule an appointment.