Close
Close

Signed plan documents must be retained by sponsors

RFP
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.

Contacts:
Jeff Martin
Partner
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

Tax professional standards statement
This content supports Grant Thornton LLP’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the topics presented herein, we encourage you to contact us or an independent tax professional to discuss their potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this content may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this content is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.

The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes. All references to “Section,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.