Employee Plans Compliance Unit (EPCU) - Featured Project - Frozen Plan Amendments
Why did I receive an EPCU Compliance Check Letter?
You filed a Form 5500 series annual return showing that your defined benefit plan was frozen; pension feature code 1I. The Form 5500 series includes Form 5500, Annual Return/Report of Employee Benefit Plan, Form 5500-EZ, Annual Return of One-Participant (Owners and Their Spouses) Retirement Plan and Form 5500-SF, Short Form Annual Return/Report of Small Employee Benefit Plan.
What is the EPCU attempting to determine?
We want to make sure that you’re keeping your frozen defined benefit plan in plan qualification compliance by updating (amending) it for current law. This means that your plan documents should be current even though the plan is frozen. A plan sponsor that doesn’t keep their plan documents current may cause their plan to lose its tax exempt status by becoming disqualified, resulting in significant tax consequences to plan participants.
What actions do I need to take?
Answer the questions on the request for information attachment and return your response by fax, mail or e-mail to the person listed in the contact letter. You may also furnish any other documents or clarifying material that you believe will be helpful to us for review. If you need additional time, contact the person whose name is shown on the contact letter to request an extension before the date the response is due.
If You Have Questions
Please feel free to contact the person listed in the contact letter with questions about this project and how it relates to your situation. The contact person’s name, mailing address and e-mail are listed on the letter.
In a frozen defined benefit plan, participants no longer accrue additional benefits except under special circumstances. However, sponsors must take steps to ensure their frozen plans continue to meet plan qualification requirements including being timely updated (amended) for current law.
The most common plan qualification errors that sponsors of defined benefit plans continue to make are not updating their plan for:
- Internal Revenue Code section 415 final regulations, which were effective April 5, 2007;
- Correct definition of Top-Heavy Ratio under Code section 416 and related regulations;
- Qualification changes in the Pension Funding Equity Act of 2004 (PFEA); and
- Qualification changes in the Pension Protection Act of 2006 (PPA).
- Recurring plan qualification issues
- Updating your plan
- Correcting Plan Errors - EPCRS - Employee Plans Compliance Resolution System
- Form 5500 and Instructions
- Form 5500-SF and Instructions
- Form 5500-EZ and Instructions
- Form 2848 and (Instructions), Power of Attorney and Declaration of Representative