Vol. 12, No. 3, Pg. 28. The Retirement Game: Positioning Your Firm.

AuthorBy Eugene Parrs

South Carolina Lawyer

2000.

Vol. 12, No. 3, Pg. 28.

The Retirement Game: Positioning Your Firm

28The Retirement Game: Positioning Your FirmBy Eugene ParrsThe old saying "the cobbler's children have no shoes" certainly applies to many law firms when it comes to their own retirement plans. Lawyers make their living advising clients on complex legal, tax and business matters, but when dealing with their own retirement plans, they have more problems than they should.

My practice is tax and ERISA related. I oversee several hundred retirement plans for all kinds of businesses. Many of my clients are law firms. It is surprising how many plans of law firms are ill suited for the firm and flirt with tax disqualification. That's the bad news.

The good news is that there is a window of opportunity that allows us to fix our plans and take the maximum tax benefits that the law allows. This article will review this opportunity in plain English, with no footnotes and tax jargon, and suggest what can be done to secure a better retirement benefit for yourself and your firm's employees.

THE OPPORTUNITY

Tax law changes over the past five years require all qualified retirement plan documents be revised. We last did updates in 1994 to comply with the 1986 Tax Reform Act. Since that time Congress has passed five significant tax laws that each require changes to retirement plan documents. For those who are keeping score, these laws are the Uruguay Round Agreements Act (GATT); the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA); the Small Business Job Protection Act of 1996 (SBJPA); the Taxpayer Relief Act of 1997 (TRA '97); and the IRS Restructuring and Reform act of 1998 (RRA '98).

These laws, in the aggregate, have been labeled GUST. All qualified retirement plans must be revised to adopt the GUST Amendments. The IRS recently announced an extension of time to make these changes. If a plan uses a calendar year, as most do, it must be restated by December 31, 2001 rather than the previous deadline of December 31, 2000. This extension gives us more breathing room to review our plans, make the necessary updates and fix the problems that we may uncover in the process.

FINDING AND FIXING PROBLEMS

Many retirement plans have problems that, if discovered on an IRS audit, would result in tax disqualification. That would be an economic and tax disaster. Over the past several years, the IRS has encouraged employers toreview their plans and make corrections on a self-help basis without risk of IRS penalty. This comprehensive program is known as the Employee Plan Compliance Resolutions System (EPCRS). If you can find and fix the problem...

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