Signed plan documents must be retained by sponsors

Tax Hot Topics newsletterIn a general legal advice memorandum (AM 2019-002), the IRS determined that plan sponsors of qualified retirement plans must retain a written document of the plan signed by the employer in order for a qualified plan to be validly adopted.

The memorandum was released in response to the Tax Court’s decision in Val Lanes Recreation Center v. Commissioner (T.C. Memo. 2018-92). In Val Lanes, the employer at issue failed to provide the IRS with a signed copy of its retirement plan as restated to include certain required provisions under Section 401(a) due to flood damage to the employer’s premises. In response, the IRS revoked the Section 401(a) qualification of the employer’s plan. However, the Tax Court found that the IRS abused its discretion because there was credible evidence that the restated plan and amendments were adopted.

In the memorandum, the IRS cautioned that the decision in Val Lanes was a factual determination based on unique circumstances. It clarified that in normal circumstances, a taxpayer is unlikely to meet its burden of proof that a plan document had been executed without providing a signed document and that the decision in Val Lanes should be limited to its specific facts. Based on the foregoing, the IRS stated that it will pursue plan disqualification if a signed plan document cannot be provided by the taxpayer.

Jeff Martin
Washington National Tax Office
T +1 202 521 1526

Keith Mong
Managing Director
Washington National Tax Office
T +1 202 521 1554

James Sanchez
Senior Associate
Washington National Tax Office
T +1 202 861 4107

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