How to Adopt or Amend Plan Documents

Right now, you’re an entrepreneur worrying all about your small business! You work long hard hours each day, manifesting your dreams as you aim to transform your hustle into something people all over the world will know and love. Totally engrossed, you haven’t much time to think about anything else, especially how your life will be once you retire.

When you have a free moment, you should consider your options for retirement. Since you’re now a self-employed small business owner, you have the power to select which retirement plan you want. Did you know that you have many of the same options to save for retirement on a tax-deferred basis as employees participating in company plans? Before you start researching retirement plans, we’ve put together some helpful tips that will make this process much easier for you.

Before you make your final decision, please consult your tax professional, asking them any questions you might have as they’re more than happy to give you helpful advice. Remember, due to the coronavirus, social distancing is strongly encouraged to protect you and others from contracting this deadly disease. Reach out to your tax professional and see if you can schedule a phone call or video meeting with them.

Establishing and amending your retirement plan requires formal action from the authorized person(s) of the business entity. Depending on your business structure, you might need to authorize the plan along with your business partners, if you have them. There are six types of business entities -- sole proprietorship, general partnership, limited partnership, C corporation, S corporation, and limited liability company. You must know which one you chose as you’ll need to follow your business entity’s requirements to ensure you secure the retirement plan you want. Do you have a reliable tax professional? This is the perfect opportunity to ask them about the specific requirements you need to complete as they vary from state to state and organization.

Depending on your entity, a resolution may be required since it’s important to the IRS. If you’re ever audited, the IRS will ask to see the resolution adopting the retirement plan you have. Your resolution or plan amendment should take place prior to the actual amendment execution. Crafting your resolution is pretty simple as it’s usually a formal, stand-alone document. Below, there is a format you can follow, but it only offers guidance and it’s not intended to serve as legal advice.

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.

Certifying action taken at a committee or board meeting:

Action may be taken at a board or committee meeting, evidenced by a certified copy of meeting minutes. How do you become certified? The template below shows you an example of the meeting minutes section that depicts the adoption or amendment of the retirement plan. This must be accompanied by the secretary’s statement with an original signature and/or corporate seal.

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].

[Unanimous] Consent in Lieu of Meeting:

A consent in lieu of a meeting may suffice if it doesn’t go against your business entity’s charter, bylaws, or state law. Once written out, the document would then be signed by the required number of board or committee members. In some cases, if the decision must be unanimous, each member may be required to sign the consent. Here is a temple of what your consent in lieu of meeting should look like:

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 [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.]

References:

“Four Questions to Answer When Adopting or Amending Plan Documents.” GuideStone.

Prakash, Priyanka. “Types of Business Entities.” JustBusiness, 17 Nov. 2020.

“Retirement Plans for Self-Employed People.” IRS, 23 Nov. 2020.