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Retirement Plans FAQs regarding Plan Language Issues for GUST and EGTRRA

These FAQs provide information on GUST and EGTRRA plan qualification requirements. For current determination letter procedures and plan language resources, see:

These FAQs provide general information and should not be cited as legal authority.


 

  1. What guidance is used to determine whether a plan document is "qualified"?

GUST:

  1. What does the acronym "GUST" mean?
  2. How was the determination letter process affected by the changes in qualification requirements enacted by GUST?
  3. When did I have to amend my plan for the changes in the qualification requirements enacted by GUST?
  4. What were the major pre-99 changes made by GUST?
  5. What were the major post-98 changes made by GUST?
  6. Are most GUST plan restatements written to be effective in 1994, 1997, or in the plan year of adoption? Does it matter as long as the specific provisions relate back to the appropriate effective dates?

EGTRRA:

  1. What does the acronym "EGTRRA" mean?
  2. How was the determination letter process affected by the changes in qualification requirements enacted by EGTRRA?
  3. When did I have to amend my plan for the changes in the qualification requirements enacted by EGTRRA?
  4. What were the major changes made by EGTRRA?
  5. Are most EGTRRA plan restatements written to be effective in 1994, 1997, or in the plan year of adoption? Does it matter as long as the specific provisions relate back to the appropriate effective dates?

 


 

What guidance is used to determine whether a plan document is "qualified"?

A qualified retirement plan must meet the applicable requirements of Internal Revenue Code section 401(a). This section changes from time-to-time as Congress enacts new laws that change existing qualification requirements. For example, the group of legislation known as GUST changed various plan qualification requirements. In 2001, Congress enacted EGTRRA, which again significantly changed these requirements.

Guidance explaining these requirements may be found in the income tax regulations, revenue procedures, revenue rulings, and other pronouncements issued by the Internal Revenue Service.

The IRS uses checksheets that contains many questions concerning qualification must be addressed by Employee Plans (EP) specialists before a plan may receive a determination letter if Form 5300 is filed. Specialists who are reviewing Form 5310 are required to complete a smaller set of checksheets that focus entirely on pertinent information disclosed on the application. A similar approach is used to evaluate Form 5307, as the volume submitter or master or prototype (M&P) plan document submitted for a determination letter was previously subject to a comprehensive and detailed review of the qualification of its provisions under IRC 401(a) before the IRS issued the advisory or opinion letter to the practitioner or prototype plan sponsor. Accordingly, any review of the application is limited to elective provisions (eligibility, vesting allocation or benefit formula, etc.) selected by the adopting employer.

The checksheets used by IRS specialists to evaluate plan qualification are available on the Web as Explanations, Alert Guidelines, and Plan Deficiency Paragraphs.

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What does the acronym "GUST" mean?

The term "GUST" refers to:

  • the Uruguay Round Agreements Act. Pub. L. 103-465 which implemented the Uruguay Round of General Agreement on Tariffs and Trade ("GATT");
  • the Uniformed Services Employment and Reemployment Rights Act of 1994, Pub. L. 103-353 ("USERRA");
  • the Small Business Job Protection Act of 1996, Pub. L. 104-188 ("SBJPA");
  • the Taxpayer Relief Act of 1997, Pub. L. 105-34 ("TRA '97");
  • the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206 ("RRA '98"); and
  • the Community Renewal Tax Relief Act of 2000, Pub. L. 106-554 ("CRA").
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How was the determination letter process affected by the changes in qualification requirements enacted by GUST?

Determination Letters:

In January 1998, the IRS announced in Revenue Procedure 98-14, 1998-4 IRB 22 the opening of the determination letter program for qualified plans seeking to comply with the changes in the qualification requirements made by the Uruguay Round Agreements Act, Pub.L. 103-465 (GATT); the Taxpayer Relief Act of 1997, Pub.L. 105-34 (TRA '97); and the Small Business Job Protection Act of 1996, Pub.L. 104-188 (SBJPA) (including IRC section 414(u) and the Uniformed Services Employment and Reemployment Rights Act of 1994, Pub.L. 103-353 (USERRA)), that were effective before the first day of the first plan year beginning on or after January 1, 1999. These changes are often referred to collectively as GUST I changes because they do not include the qualification requirements that are effective in plan years beginning after 12/31/98 or that were enacted by CRA 2000.

In Revenue Procedure 2000-27, 2000-26 IRB 1272, the IRS opened the determination letter program effective for applications filed on or after June 26, 2000, to allow sponsors of individually designed plans including volume submitter plans to obtain determination letters that take into account all the changes in the qualification requirements made by GUST including those changes made by SBJPA that were first effective in plan years beginning after 12/31/98. These determination letters are referred to as GUST II or full GUST letters.

Note: All applications for terminating plans are reviewed taking into account the applicable provisions of the law in effect as of the date of termination.

With the issuance of Revenue Procedure 2001-6, 2001-01 IRB 194, the IRS announced that effective for applications filed after March 3, 2001, it would no longer accept applications requesting a pre-GATT or GUST I determination letter for individually designed plans including volume submitter plans. Only full GUST determination letters would be issued on applications received after March 3, 2001 for individually designed plans including volume submitter plans.

With the enactment of the Community Renewal Tax Relief Act of 2000 (CRA 2000), the requirements for a full GUST determination were expanded to include a modification to the definitions of section 415 and 414(s) compensation. See Notice 2001-37, 2001-25 IRB 1340, for further explanation of these changes and for a model amendment that may be adopted to satisfy the requirements of CRA 2000. CRA 2000 amendments must be adopted within the GUST remedial amendment period.

Opinion, Notification and Advisory Letters:

In February, 2000 the IRS issued Revenue Procedure 2000-20, 2000-6 IRB 553 which revised and combined the master and prototype and regional prototype plan programs into a unified program. It also opened the unified program to allow sponsors to obtain opinion letters covering all the requirements of GUST (including the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206 (RRA - 98)). The opening date was April 7, 2000 for mass submitter plans and May 8, 2000 for non-mass submitter plans. This revenue procedure also opened the IRS's volume submitter program to allow practitioners to obtain complete GUST advisory letters for their volume submitter specimen plans. The submission deadline date was December 31, 2000.

Announcement 2000-99, 2000-51 IRB 591 reminds sponsors of M&P plans and practitioners who sponsor volume submitter specimen plans that the deadline for applying for GUST opinion and advisory letters was December 31, 2000.

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When did I have to amend my plan for the changes in the qualification requirements enacted by GUST?

In general, you had until the last day of the first plan year beginning on or after January 1, 2001 to amend or restate your plan for the changes in the qualification requirements enacted by GUST. For calendar year plans this was December 31, 2001. This was the end of the remedial amendment period under section 401(b) of the Code for amending plans for GUST. (See Revenue Procedure 2000-27, 2000-26 IRB 1272)

Note: Although plan amendments were not required before the end of the remedial amendment period, plan sponsors were required to operate their plans in accordance with the applicable provisions of GUST prior to plan amendment to the extent earlier operational compliance was required by law or regulation or other IRS guidance. (See Section 6.06 of Revenue Procedure 97-41, 1997-33 IRB 51)

Adopters and prior adopters of master and prototype, regional prototype, and volume submitter specimen plans that satisfied certain requirements were eligible for an extension of the remedial amendment period. In other words, they were eligible for an extension of the time by which their plans had to be restated for GUST. This extension was until the end of the twelfth month beginning after the date on which a GUST opinion or advisory letter was issued for the relevant master and prototype or volume submitter specimen plan. (See Section 19 of Revenue Procedure 2000-20, 2000-6 IRB 553)

To be eligible for this 12-month extension period, the following requirements had to be satisfied:

  1. Before the end of the remedial amendment period without regard to the 12-month extension, the employer adopted a M&P plan or a volume submitter specimen plan; or
  2. Before the end of the remedial amendment period without regard to the 12-month extension, the employer and a M&P plan sponsor or volume submitter practitioner certified in writing that the employer intended to restate its plan for GUST using an M&P plan or a volume submitter specimen plan; and
  3. The M&P plan sponsor or volume submitter practitioner must have submitted an application for a complete GUST opinion or advisory letter by December 31, 2000.

With the issuance of Notice 2001-42, 2001-30 IRB 70, the twelve-month extension period described above was extended to December 31, 2002.

In a major development to dramatically reduce the number of applications for GUST determination letters that must be filed in order to comply with the extended remedial amendment guidelines, the IRS issued Announcement 2001-77, 2001-30 IRB 83. This announcement modified reliance on opinion and advisory letters issued for nonstandardized master and prototype (M&P) and volume submitter plans to allow employers who adopted these plans to rely on a favorable opinion or advisory letter with respect to most qualification requirements without requesting a determination letter. This expansion of reliance made the extension of the GUST remedial amendment period described above even easier to obtain, as the extension no longer was contingent on the filing of a determination letter request for a GUST M&P or volume submitter plan that was adopted within the twelve-month extension period.

However, it is important to note that this expanded scope of reliance is dependent on an employer adopting a plan that is identical to an M&P or approved volume submitter specimen plan except for the choice of options that are permitted under the terms of the plan. Also, the M&P or volume submitter plan must have, at minimum, a GUST I letter; if no GUST II letter has been issued, the plan must have been amended to comply with all GUST requirements that become effective after 1998. In addition, the plan must have been amended to the extent necessary to comply with the Community Renewal Tax Relief Act of 2000, relative to changes in the definition of compensation under IRC 414(s) and IRC 415(e). See the Announcement for a detailed list of the qualification requirements for which reliance was granted and other limitations and conditions on the overall scope of reliance.

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What were the major pre-99 changes made by GUST?


Listed below is a summary of major changes to qualification requirements made by GATT, TRA'97, SBJPA and USERRA that were effective before plan years beginning on or after January 1, 1999.

IRC
Section

Change

General
Effective
Date

401(a)(5) Social Security Retirement Age treated as a uniform retirement age for 401(a)(4). PYBA 12/31/1996
401(a)(9) New definition of Required Beginning Date. Required actuarial adjustments. PYBA 12/31/1996
414(q) New definition of Highly Compensated Employee; Top Paid Group Election; Calendar Year Data Election. PYBA 12/31/1996
401(a)(17) &
414(q)(6)
Repeal of family aggregation rules. PYBA 12/31/1996
401(a)(26) Limited 401(a)(26) to defined benefit plans. Added 2 employee rule. Removed 50 employee requirement for Qualified Separate Lines of Business. PYBA 12/31/1996
401(k) Tax-exempt organizations & Indian tribal governments may sponsor 401(k) plans. PYBA 12/31/1996
401(k)/401(m) SIMPLE 401(k) plans. Prior year/current year testing options. Change in distribution methodology for excess contributions. First Plan Year Rule. PYBA 12/31/1996
411 Repeal of 10-year vesting schedule for multi-employer plans. PYB on or after
the earlier of
(1) the later of
(a) 1-1-1997 or
(b) the date on
which the last
collective
bargaining
agreement
terminates or
(2) 1-1-1999.
401(a)(11) &
417(e)
Involuntary cashout limit increased to $5,000. PYBA 08/05/1997
414(n) Leased employee - primary direction and control test replaces historically performed test. PYBA 12/31/1996
414(u) Allows plans to comply with the requirements of USERRA without creating qualification problems that might otherwise arise. Effective with
respect to
reemployments
initiated on or
after 12/31/1994.
415(b)(2)(E) Amends 415 requirements regarding the assumptions used in the actuarial adjustments of IRC 415(b)(2)(B), (C) and (D). LYBA 12/31/1994
415(c)(1)(A) Change in defined contribution dollar limit. LYBA 12/31/1994
415(c)(3) Elective deferrals included in 415 compensation. LYBA 12/31/1997
415(c)(3) Allows contributions for disabled employees (including HCEs) without first making an election. LYBA 12/31/1996
417(a)(7) Allows waiver of 30-day minimum waiting period between explanation & annuity starting date. Explanation may be provided after annuity starting date. PYBA 12/31/1996
417(e) Changes the prescribed actuarial assumptions used in computing the minimum value placed on certain distributions from DB plans. For distributions
with an annuity
starting date in
PYBA 12/31/1994.

PYBA = Plan years beginning after
LYBA = Limitation years beginning after

Note: See Rev. Proc. 97-41, Rev. Proc. 98-1, Rev. Proc. 98-14, Rev. Proc. 99-23 and Rev. Proc. 2000-27 for more detailed discussions of the effective dates for the changes in qualification requirements made by GUST.
 

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What were the major post-98 changes made by GUST?


 

Listed below is a summary of major changes to qualification requirements made by GATT, TRA'97, SBJPA and USERRA that were effective for
plan years beginning after December 31, 1998.

IRC
Section

Change

General
Effective
Date

401(k)(12) &
401(m)(11)
Safe harbor requirements (alternative methods of meeting the nondiscrimination requirements). PYBA 12/31/1998
401(k)(3)(F) &
401(m)(5)(C)
Alternative nondiscrimination rules for 401(k) plans providing for early participation. PYBA 12/31/1998
415(e) Repeal of combined plan 415 limit. LYBA 12/31/1999
402(c)(4)(C)/
401(a)(31)
Change in definition of eligible rollover distribution. For distributions
after 12/31/1998
415(c)(3) Qualified transportation fringes per IRC 132(f)(4) included in 415 compensation. LYBA/PYBA
12/31/2000;
retroactive to
LYBA/PYBA
12/31/1997,
if taken into account
in operation
PYBA = Plan years beginning after
LYBA = Limitation years beginning after

 

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Are most GUST plan restatements written to be effective in 1994, 1997, or in the plan year of adoption? Does it matter as long as the specific provisions relate back to the appropriate effective dates?

In our experience, the most frequently occurring plan restatement effective date has been the beginning of the 1997 plan year. Assuming there are no other relevant issues involved, the general effective date of the restatement does not matter as long as the correct effective date of each GUST provision is clearly defined in the document.

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What does the acronym "EGTRRA" mean?
The term "EGTRRA" refers to the Economic Growth Tax Relief Reconciliation Act of 2001, Pub. L.107-16.
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How was the determination letter process affected by the changes in qualification requirements enacted by EGTRRA?
 
Determination Letters:
 
In 2005, the IRS issued Revenue Procedure 2005-66, which substantially revised the determination letter program for qualified plans seeking to comply with the changes in the qualification requirements made by EGTRRA that were effective as of the first day of the first plan year beginning on or after December 31, 2001. This revision created a “staggered” remedial amendment system for plans to amend for these changes and submit for determination letters. In 2007, additional revisions were made which modified this program to its current state. The procedural guidance for this program is contained in Rev. Proc. 2007-44. See Determination, Opinion and Advisory Letters for Retirement Plans - Staggered Remedial Amendment Cycles.
 
In general, under this system, sponsors must amend their plans and submit applications for determination letter pursuant to a predetermined “cycle.” For plans maintained and administered using individually designed documents, this cycle is generally determined by the last day of the sponsor’s tax identification number. For pre-approved plan documents, that cycle is generally every six years.
 
Plans maintained under either cycle must be amended for and will receive determination letters that take into account all the changes in the qualification requirements made that are applicable for that cycle. The list of changes that are applicable to each cycle is known as the cumulative list.
 
Note: All applications for terminating plans are reviewed taking into account the applicable provisions of the law in effect as of the date of termination. The termination of the plan might accelerate amendment requirements before the otherwise determined end of the remedial amendment period.
 
Opinion, Notification and Advisory Letters:
 
In 2005, the IRS issued Revenue Procedure 2005-16, which sets forth the procedural guidance that governs the review process for master and prototype and volume submitter approval programs. Under this guidance, defined contribution and defined benefit specimen submissions are reviewed under two separate 6 year cycles. The submission period for EGTRRA defined contribution plans was February 15, 2005 through January 31, 2006, and February 1, 2007 through January 31, 2008 for EGTRRA defined benefit plans. See Apply for an Opinion or Advisory Letter - Pre-Approved Retirement Plans for current procedures.
 
Announcement 2008-23 opened the adoption window for sponsors who maintained plans using pre-approved documents to amend their plans (by adopting a plan updated for EGTRRA) within the two year period ending on April 30, 2010.
 
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When did  I have to amend my plan for the changes in the qualification requirements enacted by EGTRRA?
 
In general, you had until the last day of your plan's applicable remedial amendment “cycle” for a “restatement” amendment of the plan, covering all laws for the entirety of the cycle, provided that a properly executed “good-faith” amendment was executed by the employer prior to the end of the employer’s 2001 plan year.
 
Each plan year, some “interim” changes are required in the form of an interim amendment for those changes applicable to that year, generally on or before the due date of the income tax return of the employer-sponsor’s tax year that coincides with or within that plan year. Other changes to the plan that an employer might electively make must be covered by a plan amendment due not later than the last day of the plan year in which the changes are put into affect ("discretionary amendments"). (Some changes, such as changes to employee benefits or allocations, might require even earlier amendments.)
 
This cycle is determined by the last digit of the sponsor’s tax identification number for plans administered using individually designed documents, or the last day of the two year period following approval for plan’s administered using pre-approved documents.
 
For individually designed plans, restatement amendments must be made according to a 5-year cycle. Interim amendments must also be executed by the employer.
 
Adopters of master & prototype and volume submitter specimen plans that satisfy certain requirements are determined instead under a 6-year cycle that is tied to the review and approval process for these specimen plans.
 
To be eligible for the 6 year cycle for EGTRRA, the employer must have used a pre-approved plan that met one of the following criteria:
  • Prior adopter (meaning the plan was administered with a GUST-approved supplied specimen);
  • New adopter (where the pre-approved document was adopted prior to the expiration of the otherwise determined 5 year cycle);
  • Intended Adopter (where the employer certifies intent to adopt the pre-approved document, by executing Form 8905 prior to the expiration of the otherwise determined 5 year cycle); or
  • Replacement Plan adopter (where the employer adopts one pre-approved document from one provider who is ultimately bought out by another)
 
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What were the major changes made by EGTRRA?
 
View our Table of major EGTRRA changes to qualified plan law.

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What was the appropriate effective date or dates to be used on an EGTRRA restatement document?
 
In general, there are two ways to correctly express effective dates in a restatement document which includes provisions which have separate effective dates. One method is to set the general effective date as the first day of the current plan year, with specific changed provisions having separate effective dates which are “walked back” to the date determined by the law change. An alternate is to make the general effective date as the earliest date of the effective date of legislation, with separate later effective dates for provisions that phase-in later. The most frequently occurring plan restatement effective date for EGTRRA was the beginning of the 2002 plan year. Assuming there were no other relevant issues involved, the general effective date of the restatement does not matter as long as the correct effective date of each EGTRRA provision was clearly defined in the document.
 
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Page Last Reviewed or Updated: 18-Jul-2014