July 16, 1999

If your business sponsors a tax-qualified retirement plan, the IRS has just given you a one-year extension to amend the written plan documents for recent changes in the tax law.

Over the past five years, several laws made changes affecting the qualification requirements for pension, profit-sharing, stock bonus, and similar retirement plans. The changes in these laws, which were enacted in 1994 and 1996, became effective on various dates between 1996 and 1998.

Plan sponsors had been told last July that they were required to adopt written plan amendments to comply with the provisions of these tax laws by the end of the plan year beginning in 1999. Thus, the sponsor of a calendar-year plan was faced with having to amend its plan by December 31, 1999.

Meanwhile, new tax laws were enacted in 1997 and 1998 that also contained provisions affecting qualified plans. The amendments to reflect these changes also had to be made by the end of the 1999 plan year.

Now, the IRS has announced that it is extending the due date for making plan amendments for the 1994, 1996, 1997, and 1998 law changes to the last day of the plan year beginning in 2000 (December 31, 2000, for calendar-year plans).

The IRS cautions that the extension applies only to adopting written plan amendments. Be aware, though, that plans must operate in compliance with the various changes as of each individual change’’ effective date or risk losing their tax-qualified status.

The required changes are numerous, and many are highly technical in nature. In most cases, plan sponsors will need to “restate” their entire plan documents. As a result, you shouldn’t wait too long to begin a review of your plan in light of its amendment requirements.