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If we approach the end of the adoption agreement, our sections will be much shorter. Our adoption agreement is complemented by Section J, the last simple page of the adoption agreement, which exists mainly for signatures. Ok, the signature is complete. We have now spent enough time with the basics of the 401(k) adoption agreement. Let`s jump straight into the particularities and break down the document section by section. This last page, necessary for the adoption agreement to enter into force, confirms all the information and selections made in the adoption agreement and obtains the signature of your plan sponsor to support everything. This section is quite simple. Other important information about the plan, rules and details that have not been included in the standard introductory agreement can be presented here. Depending on the nature of your plan, this section may or may not be used. From here we start in the meat of the adoption agreement – all the plan options and settings of your plan. The rules for withholding and reconciling contributions with your 401(k) pension plan are set out in this section of the adoption agreement.

Here you will find information on the compensation of employers` contributions and profit-making formulas. If you change the pre-approved planning document or acceptance agreement, with the exception of certain changes authorized to the IRS (see Revenue Procedure 2015-36, Sections 5 and 14 and Revenue Procedure 2017-41, Section 8), the IRS may treat the plan as a new custom plan. In other words, the plan document is so different from the previously approved plan that the IRS has verified and approved it that it is treated as a brand new plan. If your plan is customized, you can no longer rely on the pre-approved document provider`s advice or letter of advice. If you wish to obtain IRS insurance for your amended planning document, you can, if you justify it, request your own letter of finding (on Form 5300). See What is a favorable destination letter? The 401(k) adoption agreement is the document that defines the specific features of your 401(k) plan. The adoption agreement is established by the third-party administrator (TPA) using the basic plan document. The basic plan document contains all the possible options that can be selected from the document options of this TPA. Through the adoption agreement, an employer sponsoring a 401(k) plan (a plan sponsor) chooses the rules applicable to their retirement or benefit plan. These include parameters such as: It is worth mentioning that the adoption agreement is a part of the full plan document (consisting of the basic plan document and the adoption agreement). Together, they should contain everything there is to know about your retirement.

During an audit, the auditor requires that certain planning documents be provided to the auditor in a timely manner. If you have the adoption agreement and your basic plan document, you can prepare for it if the DoL or Internal Revenue Service (IRS) knocks on the door. It`s always a good decision. If you are in one of these categories, you must (re)visit Adoption Agreement 401(k) to define the terms of a new retirement plan. By including the functions selected by the plan sponsor, the TPA typically establishes the 401(k) adoption agreement. The new (or amended) pension plan is active as soon as the adoption agreement is concluded. A “Sponsor” is a U.S. company that has at least 15 employer clients (according to the 2015-36 Revenue Procedure, Section 4.07) that it reasonably expects to accept the Sponsor`s Master Plan Base Document by the required date.

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