Establishing a retirement plan is an infrequent occurrence for an organization. However, once a plan is established, periodic updates will be required. Some changes are the result of government regulations while other updates occur when an organization amends its plan to better serve the needs of both the employer and the employee.
Use the following four questions as you evaluate the procedures for plan amendments and occasional updates:
The establishment and the amendment of an organization's plan require formal action to be taken by the authorized person(s) of the entity. For example, a charter or bylaws may require a resolution by the board of directors to establish a plan, or it may authorize the board to delegate that authority to a committee. Similar formal action is also required to appoint trustees for the plan.
In some organizations, an executive officer may have full authority to establish or amend a plan without a committee or board action. To ensure compliance with your entity's requirements, GuideStone® recommends you consult your legal advisor, as the rules vary by state and by organization.
Yes, if a resolution is required by an entity, it will be important to the IRS. The IRS will ask to see the resolution adopting the plan or plan amendment if you are audited.
Generally, a resolution adopting a plan or a plan amendment will occur prior to the actual amendment execution. However, resolutions ratifying action taken previously by authorized persons may take place in subsequent board meetings occurring in the same plan year as the adoption or amendment.
Sample descriptions and formats for these official documents are outlined below. Please note that they are offered as guidance only and are not intended to serve as legal advice.
Action by resolution:
A resolution may adhere to a more formal appearance as a stand-alone document. If so, it may follow a format similar to the following:
Resolution to [Adopt/Amend] a Retirement Plan
Whereas, the board of directors (Board) considered a proposal to [adopt/amend] a retirement program for the employees of [entity name]; and
Whereas, after review of various presentations on plan design and service provider options, the Board agreed to adopt the following resolution:
Resolved, that the [retirement plan name] is hereby [adopted/amended], effective [date]; and
Resolved that [trustee name] is appointed to serve as the [directed trustee] of the plan; and
Resolved further that [individual's name] is authorized to execute any legal documents necessary to [adopt/amend] the plan.
The resolution would then be signed by the required number of board members. This number, typically stipulated in the entity's charter, may be a quorum or majority of board members. In cases where unanimous consent is needed, all board members may be required to sign the resolution.
Certifying action taken at a committee or board meeting:
Action may also be taken at a board or committee meeting and evidenced by a certified copy of the minutes of the meeting. To be certified, the copy of the meeting minutes section that covers the adoption or amendment of the plan must be accompanied by the secretary's statement with an original signature and/or corporate seal, if required.
The certification may include language similar to the following:
I, [board or committee secretary name], hereby certify that the attached document is a true and exact copy of the [board/committee] meeting minutes dated [date].
If your organization conducts business during board or committee meetings, be sure to keep a certified copy of the meeting minutes section that covers the board's decision. Although this method may be used as an alternative to a board resolution, the preferred approach is for the board to adopt a resolution.
Consent in Lieu of Meeting
Alternately, a consent in lieu of a meeting may suffice if it is not inconsistent with the organization's charter, bylaws or state law. If action is taken by a consent in lieu of a meeting, the official document may look something like this:
[Unanimous] Consent in Lieu of Meeting
The [board of directors/committee name] considered a proposal to [adopt/amend] a retirement program for the employees of [name of entity]; and after review of various presentations on plan design and service provider options, the undersigned members of the [board of directors/committee name] desire to take the following actions by [unanimous] consent:
That the [retirement plan name] is hereby [adopted/amended] effective [date]; and [trustee name] is appointed to serve as the [directed trustee] of the plan; and
That [name] is authorized to execute any legal documents necessary to [adopt/amend] the plan.
[Add if the plan is being established for the first time: [Authorized entity] adopts the plan year as the limitation year.]
A consent in lieu of meeting document would then be signed by the required number of board or committee members. This number, typically stipulated in the entity's charter or committee bylaws, may be a quorum or majority of members. In some cases, if it must be unanimous, all members may be required to sign the consent.
Whatever form of action taken, document(s) evidencing such action should be kept with the appropriate plan document for the life of the plan and beyond.
Determining the answers to these four questions and appropriately documenting those answers can help create a seamless plan amendment process.
This information should not be considered tax or legal advice. GuideStone stands ready to assist your organization as you work with your legal and tax advisors by providing resource information that you and your advisor may find beneficial.