1. What does GUST stand for?
GUST is an acronym for a series of laws affecting qualified retirement plans. GUST stands for GATT (General Agreement on Tariffs and Trade, USERRA (Uniformed Services Employment and Reemployment Rights Act of 1996), SBJPA (Small Business Job Protection Act of 1996), TRA '97 (Taxpayer Relief Act of 1997), RRA ‘98 (IRS Restructuring and Reform Act of 1998) and CRA (Community Renewal Tax Relief Act of 1997).
2. What does GUST mean to me, the employer, and my employees?
The IRS requires that all plan documents, whether individually designed, master prototype, or volume submitter specimen plans, be amended to comply with the applicable legislative changes required by GUST.
As a result of these tax law changes, existing Merrill Lynch Basic Plan clients, as well as RCMA clients who have adopted the Merrill Lynch Defined Contribution Prototype Plan, are required to amend and restate their plan documents.
Plan Sponsors who do not restate their retirement plans in a timely manner risk losing their plan’s tax-qualified status. Failure to restate a retirement plan can result in substantial taxes and penalties for employers, as well as their employees.
3. What changes to the law were made by GUST?
The changes are outlined in the “Key Provisions Chart” within the GUST Restatement Instruction Book, which was included in your restatement package. The following, like the Chart, summarizes some of the key legislative changes made by GUST.
GATT - set increments in cost-of-living increases in the $30,000 IRC Section 415 contribution limit (i.e., the 415 limit rises in $5,000 increments for defined contribution plans).
USERRA - set forth how contributions and service credits are handled when a participant is called up for military service, as well as the suspension of loan payments during military service.
SBJPA - made many changes including, but not limited to, the following:
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Simplified the definition of Highly Compensated Employee.
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Allowed plan sponsors the choice of using certain safe harbor provisions to avoid ADP/ACP testing.
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Repealed the minimum participation test under 401(a) (26).
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Modified the minimum distribution rules to allow participants other than 5% owners who remain employed past age 70 1/2 to postpone receiving distributions until they actually retire.
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Repealed IRC Section 415(e) combined limit for annual additions.
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Repealed family aggregation rules for purposes of determining HCEs and compensation limits.
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Repealed special aggregation rules for plans of owner-employees.
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Changed definition of “leased employee” to mean only if services are performed under the primary direction or control of the service recipient.
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Allowed use of “Social Security Retirement Age” for nondiscrimination testing.
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Repealed five-year forward averaging for lump-sum distributions.
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Suspended 15% excess distribution penalty between January 1, 1997 and January 1, 2000.
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Waived the 30-day period required for election of an annuity (to seven days).
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Repealed the $5,000 death benefit exclusion.
TRA ‘97
- Raised involuntary cash-out limit from $3,500 to $5,000.
- Permanently repealed the 15% excess accumulation estate tax and excess distribution tax.
RRA ‘98
- A hardship distribution of elective deferrals is no longer an "eligible rollover" and is therefore not subject to mandatory 20% withholding.
- The 10% early withdrawal penalty tax does not apply to distributions due to IRS tax levy.
CRA
- Changed the definition of compensation to include transportation fringe benefits reduction.
4. Why did you send me this package?
Our records indicate that you are using the Merrill Lynch Basic/RCMA Prototype Defined Contribution Plan. If you have a Basic account, you are required, upon establishing the account with Merrill Lynch, to adopt the Merrill Lynch Basic/RCMA Prototype Defined Contribution Plan.
5. What am I required to do?
The restatement package Merrill Lynch has sent to you contains a detailed instruction book to assist you and your tax advisor with amending and restating your Merrill Lynch prototype plan to comply with GUST. The book provides line-by-line instructions on how to complete the Adoption Agreement. Please review the book completely.
In addition:
- Review the package with your plan administrator, recordkeeper, CPA, or tax advisor.
- Complete the Adoption Agreement, including your Merrill Lynch account number.
- Sign and date the Adoption Agreement.
- Review the EGTRRA Amendments.
- Review the Model Required Minimum Distribution Amendment.
- Return the “Merrill Lynch Copy” of the Adoption Agreement to Merrill Lynch in the postage-paid return envelope no later than February 21, 2008.
6. What if I do not return the Adoption Agreement by the February 21, 2008 deadline?
All qualified plan sponsors are legally required to amend and restate their qualified retirement plan for GUST. By failing to timely restate your plan, you risk disqualification of the plan, which could result in additional taxes and penalties for you and your employees.
7. I am no longer using the Merrill Lynch prototype plan document. Am I still required to complete the Adoption Agreement?
If you have an open and active Basic retirement account with Merrill Lynch, you should be using the Merrill Lynch Basic/RCMA Prototype Defined Contribution Plan. If you are not using the Merrill Lynch prototype plan, you should consult your tax advisor or plan administrator.
8. Does Merrill Lynch charge a fee for restatement?
Employers who adopt the Merrill Lynch Basic/RCMA Defined Contribution Prototype Plan are charged a $50 annual plan maintenance fee. This fee covers all administrative costs associated with the plan document, including this restatement.
9. I would like to terminate my plan. What do I need to do?
Merrill Lynch does not provide tax advice. Because terminating a qualified retirement plan can involve complex tax issues, you should contact your plan administrator, recordkeeper, CPA, or tax advisor for guidance on terminating your qualified retirement plan.
10. I am interested in merging a Money Purchase Plan into a Profit-Sharing Plan. What do I need to do?
Merrill Lynch does not provide tax advice. Because merging a Money Purchase Plan into a Profit -Sharing Plan can involve complex tax issues, you should contact your plan administrator, recordkeeper, CPA, or tax advisor for guidance on merging qualified retirement plans.