Retirement plan deadline nears

The Internal Revenue Service wants owners of small and medium-sized businesses to stop blowing off that letter from their retirement-plan advisor.

Boring as it may be, the letter asks business owners to take some time to approve changes made in the operation of their company's retirement plan.

If the changes aren't approved, businesses face the possibility that they might lose the tax benefits of a retirement plan.

In a telephone interview last week, Carol Gold, the Washington-based employee plans director of the IRS, explained: About 750,000 small and mid-sized businesses across the nation use "off-theshelf " employee retirement plans that they obtain from sponsors such as banks, brokers, insurance companies, lawyers or consultants.

The technical name for the plans is "Master and Prototype," and they're essentially IRS-approved templates.

A similar group of plans the IRS calls them "Volume Submitter" plans are somewhat more customized retirement documents that usually are handled by lawyers or consultants.

In either case, the outfit that administers the plan has been keeping it up to date with IRS changes from year to year.

But, Gold said, the IRS requires business owners every six or seven years to review the changes and sign off on them.

"All the heavy work has been done," she said.

Plan administrators have kept retirement documents up to date and simply need their clients to review the changes before Sept.

30.

But, Gold said the IRS is hearing from plan administrators that they're having a tough time getting businesses to respond.

"We are very concerned that employers may inadvertently miss the deadline," she said.

"The September deadline will be here before you know it."

At the same time that it's cautioning business owners to sign off on the paperwork, the IRS also is doing everything it can to encourage more small businesses to launch employee retirement plans.

Gold said only about 24 percent of the employees of small businesses have employee-sponsored retirement plans available to them, compared with 68 percent of those who work with companies with 100 or more employees.

When workers have employer-sponsored plans, she said, they're seven times more likely to save money for their retirement plan than they are if they're on their own.

Gold acknowledged that some owners of small business may be discouraged from offering a retirement plan because of their perception that the laws are so complex that it's difficult for a small company to stay in compliance.

Starting in 2002, the IRS and the Department of Labor began an effort to tell owners of small businesses about the types of plans some of them simple that are available, the mechanics to establish a retirement plan, the steps needed to operate a retirement plan within the law and how a company can wrap up its employee retirement plan if it goes out of business.

Need more information? The Internal Revenue Service can provide more information about retirement plans and the process of formally updating them at:

* A Web site, www.irs.gov/retirement/topic/index.html

* A toll-free line, (877) 829-5500 In addition, IRS Publication 3998 provides an outline of retirement plans that can be an offered by employers, everything from the simplest SEP IRAs to complex defined-benefit and defined contribution plans.

It's available for download at www.irs.gov/pub/irs-pdf/p3998.pdf