PPA Document Restatements: Plan Early and Often

By Linda M. Wyttenbach, QPA, QKA

At this year’s ASPPA Annual Conference, Adam C. Pozek, ERPA, QPA, QKA, QPFC, a partner with DWC ERISA Consultants, shared some great tips on preparing for the upcoming PPA restatements.

Pozek suggested handling the upcoming PPA restatements in a fashion similar to the EGTRRA restatements. That way, practitioners can take some comfort in knowing what to expect. Unlike the EGTRRA documents, which were outdated immediately, it appears that the PPA document will be current for the most part — meaning that this is one less item we will have to explain to plan sponsors. (Pozek noted one exception — if a plan sponsor has elected to adopt the optional in-plan Roth transfer provision, which will be added via a snap-on amendment.)

Pozek offered three suggestions for preparing for the restatement process:

• Compare the provisions in the PPA document with the EGTRRA document in order to familiarize yourself with the differences and the new options available.

• Determine if you’d like to adopt defaults  across multiple plans to be in line with your business practices.

• Examine the frequency of provisions that cause confusion, then determine which changes are necessary across all plans — thereby avoiding the constancy within multiple plans going forward.

Turning to the topic of preparing for the restatements themselves, Pozek suggested addressing these basic items:

Task or Opportunity

Usually it’s not safe to approach this as a task in which you simply roll the document forward from the EGTRRA version to the PPA version, Pozek noted. This is because you want to be sure that any customized provisions not in the current document system are captured instead of inadvertently changing them back.

Pozek suggested taking the opportunity to not only convert to the PPA document but also to complete an in-depth review of each plan’s provisions in order to:

• confirm that the document matches how the plan is being operated;

• identify whether changes are necessary going forward;

• enhance the plan design to be more in line with the plan sponsor’s objectives;

• maximize the value of the plan; and

• maximize your value to the client.

Consult with clients and offer recommendations on things they might want to consider changing, he urged attendees; dig in and help your clients have a retirement program that meets their needs.

Pozek raised numerous questions that should be answered:

Restatement Fees

• Adopt an annual document maintenance fee that includes all discretionary amendments and mandatory restatements, rather than using a fee-for-service model?

• Require a deposit?

• Affirmative election by clients that you will do the work? If so, will the fee increase the longer it takes a client to respond?

• Additional fee for revisions requested after the documents have been delivered to the client?

• Graduated schedule based on when they became a client or when we last amended/restated their document?

• Offer a payment plan?

Document Delivery

• Hardcopy or electronic? If hardcopy, will there be an additional fee?

• Mail/e-mail or post to the web? Will sending directly to the client call more attention to it?

• If documents are delivered to an intermediary (such as the financial advisor), does he or she understand the process and deadlines?

Signatures

• When e-mailing documents, send a separate pdf including signature pages only?

• Obtain E-signatures through your document system or other third party, which provides an audit trail of who signed what and when?

Timing

• First in, first out?

• Restate based on client segmentation, such as plan type or complexity of plan provisions?

Client Communication

• Consider sending hardcopy communication via U.S. mail to your clients that includes a summary of changes (or lack thereof), enhancements available in the PPA document, timing requirements and deadlines, and the fees that will apply.

Other Items to Consider

• Administering the plan in the meantime — use pre-restatement provisions or proceed as though the client has already signed them?

• How to handle service/plan terms after process has started?

• Timing requirements for implementing plan provision changes, including the restriction on amending safe harbor plans mid-year. The IRS’s current stance on not allowing forfeitures to be used to reduce employer contributions would be a change for many plans, most of which will need to be taken into consideration when determining the restatement effective date.

• Make a note to incorporate the plan sponsor’s address and telephone number changes, etc. into the PPA documents.

Dealing with Problems

When dealing with untimely signed documents, incorrect document provisions or the plan not being operated based on its terms, etc., remember that EPCRS is your best friend, Pozek commented. In closing, he offered, “This is a big deal. Begin building a process for it — plan early and often!”

Linda M. Wyttenbach, QPA, QKA

Document Services Manager

The Retirement Advantage

ASPPA member since 2001

Category: News