Since 1994, Congress has made a number of changes to the laws affecting qualified retirement plans. Collectively, these changes are known as "GUST." Each piece of legislation contained in GUST modified, in some manner, the rules applicable to tax qualified retirement plans. Many of the changes that have been made are advantageous to qualified plans and may benefit you and your plan participants.  However, with the benefit of the law changes comes the burden of having to incorporate the law changes into the employer's retirement plan document. The plan may also need to be redesigned to make certain it continues to comply with the law and to meet your needs.

GUST stands for:
    General Agreement on Tariffs and Trade (GATT)
    Uniform Services Employment and Reemployment Rights Act (USERRA)
    Small Business Job Protection Act (SBJPA)
    Taxpayer Relief Act of 1997 (TRA '97)

        All qualified plans are impacted by the new laws and all plans will need to be restated. This includes profit sharing, money purchase, 401(k) profit sharing, defined benefit, target benefit, stock bonus, and employee stock ownership plans. The IRS has determined that there are enough new law changes to warrant a plan restatement, rather than an amendment of only some plan provisions. A completely restated plan will be easier to read, easier to administer, and easier for the IRS to review. Until the IRS mandated deadline-December 31, 2002-, a plan may "operationally comply" with the new laws. This means an employer must administer the plan properly, according to the plan's existing terms, plus any new law changes. Therefore, while the plan may be restated later, it should be operated as if it has already been rewritten to incorporate and comply with the new laws.

        You must restate the plan no later than the last day of the "GUST remedial amendment period." The "GUST remedial amendment period" is the period the IRS has determined is sufficient to enable an employer to incorporate all GUST law changes into the written plan document. The GUST remedial amendment generally ends on the last day of the plan year beginning in 2001. For a calendar year plan, this is December 31, 2001. For a plan other than a calendar year plan, the 2001 plan year is the plan year which begins during the 2001 calendar year. For example, for a plan with a November 30 year end, the 2001 plan year begins on December 1, 2001, and ends on November 30, 2002. Although the GUST remedial amendment period generally ends on the last day of the 2001 plan year, the IRS may provide additional time for certain IRS pre-approved plan documents (e.g. prototype documents).

Briefly, the new Acts include the following changes to qualified retirement plans:

1. There is a new definition of Highly Compensated Employees for testing purposes;

2. The need to aggregate compensation under the Plan is removed for family members thus eliminating restrictions on contributions for family members;

3. Certain nondiscrimination testing rules and methods of correction for 401(k) Plans have been revised;

4. The requirement that non-five percent (5%) owners must take minimum distributions by April 1 of the calendar year following age seventy and one-half (70 ½) even if still employed is removed;

5. There is a new definition of "leased employee";

6. Participants are now able to waive certain notice requirements for plan distributions;

7. There is an increase from three thousand five hundred dollars ($3,500) to five thousand dollars ($5,000) in the amount that is allowed to be distributed under a Plan without a participant's consent;

8. The definition of Compensation for purposes of Internal Revenue Code Section 415 has been expanded to include salary deferrals under Internal Revenue Code Sections 125, 401(k), 402(g) (3) and 457;

9. Certain employment rights are extended under qualified retirement plans for employees who leave employment for periods of military service and are subsequently reemployed by their Employer; and

10. 401(k) Plan hardship distributions are ineligible for rollover to an Individual Retirement Account.

Click here to Return to Planned Retirement's mainpage.