Volume Submitter Adoption Agreement: What Is It and Why Does It Matter?

If you are familiar with the world of pension and retirement plans, you may have come across the term “Volume Submitter Adoption Agreement” or VSAA. This document plays a central role in determining the terms and conditions of a retirement plan, specifically one that is designed for a group of employers, such as a trade association or a professional organization. In this article, we’ll take a closer look at what a VSAA is, what it includes, and why it’s important for plan sponsors, plan administrators, and plan participants.

What Is a Volume Submitter Adoption Agreement?

A Volume Submitter Adoption Agreement, or VSAA for short, is a pre-approved document that serves as the basis for adopting a defined contribution retirement plan, such as a 401(k) or a profit-sharing plan. It is filed with the Internal Revenue Service (IRS) and contains all the essential terms and provisions of the plan, including eligibility, contributions, vesting, distribution, and other features. The VSAA allows multiple employers to adopt the same plan design, with some customization options, and to get IRS approval without having to submit a separate application for each plan.

The VSAA is created and maintained by a third-party vendor, usually a law firm or a consulting firm, which specializes in retirement plan design and compliance. The vendor typically offers a catalog of VSAA templates, each of which has been reviewed and approved by the IRS based on certain standard provisions. The plan sponsor, who is responsible for selecting and maintaining the plan, chooses the VSAA that best suits its needs and makes any necessary modifications to fit its specific circumstances.

What Does a Volume Submitter Adoption Agreement Include?

A VSAA is a complex legal document that covers a wide range of topics related to the retirement plan. Some of the key provisions that are typically included in a VSAA are:

– Plan name, effective date, and sponsor information

– Definition of compensation and plan year

– Eligibility criteria, such as age, service, and job classification

– Types of contributions, such as salary deferral, matching, profit sharing, and safe harbor

– Vesting schedules, which determine how much of the employer contributions employees are entitled to keep if they leave the company

– Allocation methods, which determine how the contributions are distributed among the participants

– Investment options, which allow the participants to choose among a menu of mutual funds or other asset classes

– Distribution rules, which dictate when and how the participants can receive their account balances, such as age, retirement, disability, death, or hardship

– Plan amendments and termination, which describe how the plan can be changed or terminated, and what happens to the assets and liabilities.

These provisions are subject to various legal and regulatory requirements, such as the Employee Retirement Income Security Act (ERISA), the Internal Revenue Code, and the Department of Labor rules. The VSAA ensures that the plan complies with these requirements and provides a uniform template for all adopters to follow.

Why Does a Volume Submitter Adoption Agreement Matter?

A VSAA can offer several benefits to plan sponsors, plan administrators, and plan participants:

– Efficiency: By using a pre-approved VSAA, the plan sponsor can save time and money on legal and compliance fees, as well as reduce the risk of errors or omissions in the plan document.

– Flexibility: The VSAA allows the plan sponsor to tailor the plan design to its specific needs, such as different contribution levels, vesting schedules, or investment options.

– Compliance: The VSAA assures that the plan meets the IRS requirements for a qualified retirement plan, which allows the participants to enjoy favorable tax treatment on their contributions and earnings, as well as avoid penalties or sanctions for noncompliance.

– Portability: The VSAA enables the participants to transfer their account balances to another employer that adopts the same plan design, as long as the plan sponsor allows for a “portability” feature.

– Transparency: The VSAA provides a clear and concise summary of the plan features and rules, which helps the participants understand their rights and responsibilities, as well as make informed decisions about their retirement savings.

In conclusion, a Volume Submitter Adoption Agreement is a crucial document that lays the groundwork for a successful and compliant retirement plan. It offers a streamlined and flexible way for multiple employers to adopt a common plan design, while accommodating their unique needs. If you are involved in the administration or oversight of a defined contribution retirement plan, make sure you understand the role and content of the VSAA and seek professional advice if you have any questions or concerns.