SCP & Retro Amendment

[Susan S.]

Safe harbor 401(k) has a YOS requirement, but the plan sponsor has been operating as immediate entry.

Per the plan document and SCP, a retroactive amendment will be drafted to correct the inclusion of the ineligible employees. The SCP procedure says that the amendment can only include the affected employees. The employer wants to keep the immediate entry permanently. Can the retroactive correction and the change to future entry requirements be done in the same amendment? Does the language "anyone hired on or after" a specific date, without specifically naming any employees, satisfy the SCP rules and adequately convey the change to the entry requirements going forward?

[Tom Poje]

my guess is 'yes', as I recall, under SCP when using a retro active amendment like that you are supposed to submit for a determination letter, so you probably will find out one way or another

[Kevin C]

I don't see any reason you can't have the corrective amendment provisions remain in effect going forward. The corrective amendment can be written to only apply to those actually let in early, but you are not required to do it that way. Whether or not you file for a determination letter will depend on how the amendment is done.

Rev. Proc. 2013-12, Section 6.05 Submission of a determination letter application. (1) In general. This section 6.05 sets forth the situations in which a determination letter application is required to be submitted as part of the correction of a Qualification Failure if the correction includes a plan amendment. If a determination letter application is required under this section 6.05, then, unless otherwise specified in this revenue procedure, the provisions of Rev. Proc. 2007-44 will apply. Thus, for example, in the case of an ongoing individually designed plan, a determination letter application will be reviewed with respect to all items included in the Cumulative List (as defined in Rev. Proc. 2007-44) that would apply to the remedial amendment cycle during which the determination letter is filed. Notwithstanding any other part of this section 6.05, a determination letter application is not required and may not be submitted with the VCP submission if (a) the correction by plan amendment is achieved through (i) the adoption of an amendment that is designated as a model amendment by the Service or (ii) the adoption of a prototype or volume submitter plan with an opinion or advisory letter as provided in Rev. Proc. 2012-6, 2012-1 I.R.B. 197, on which the Plan Sponsor has reliance (or is treated as having reliance pursuant to section 6.05(5) below), or (b) the failure corrected is a Demographic Failure.