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Retroative Non-GUST Amendments on GUST Prototype Restatement?


Guest T-BONE

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Guest T-BONE

Situation: A prototype sponsor's GUST restatement is effective 1/1/1997. A number of plan design changes occurred during the GUST remedial amendment period, and amendments were made to the pre-GUST prototype.

Question: Since the effective date of the prototype GUST restatement is 1/1/97, is it necessary to complete the adoption agreement as the plan exisited in 1997, and then "supplement" the adoption agreement with the effective dates of the non-GUST amendments?

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I'm not sure that all mass-submitter type plans follow the route that I'm about to discuss, but I think the IRS has stated at various conferences that it is their preferred method of dealing with things. While you can certainly do it the way you describe, the method I'm thinking of establishes the first day of the plan year during which the GUST restatement takes place as the general effective date of the restatement. The document itself has specific effective date language for provisions that are required by law to have effective dates prior to the general effective date of the restatement. If done in this manner, you then include in the GUST restatement the elections which are in effect as of the general effective date of the restatement and let the natural operation of the plan prior to that date superimpose the provisions in effect prior to the general effective date.

Where it gets murky is where a Plan Sponsor may have operationally applied different provisions between 1/1/97 and the general effective date of the GUST restatement. For those things (such as the election of the top 20% rule, the look back period in the case of non-calendar year plans and the use of either current or prior year testing among others) which might have gone back and forth during the period in question, I usually suggest that the document be modified to reflect those in some way. Others argue that there is no need to have them reflected in the document, as they believe they can be implemented by administrative election for periods before the general effective date of the restatement.

I guess we'll find out if somebody talks about an audit experience they've had dealing with the issue.

Of course, if the mass submitter document does not allow for this preferred procedure, one is most likely going to be required to have the restatement include the changes since the effective date.

You'd have to check with the plan document provider to see which way is indicated.

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Mike,

I think you may be right that using the current year as the effective date and simply making sure that the specific GUST provisions have the correct retroactive date may be the simplest way to go. That would also solve T-Bone's issue. But the IRS's own FAQ on GUST seem to indicate that they are mostly seeing 1997 Plan Year effective dates :

Plan Language Issues:

Are most GUST plan restatements written to be effective in 1994, 1997, or in the "current" (i.e. year of adoption) plan year? Does it matter as long as the specific provisions relate back to the appropriate effective dates?

In our experience, the most frequently occurring plan restatement effective date has been the beginning of the 1997 plan year. Assuming there are no other relevant issues involved, the general effective date of the restatement does not matter as long as the correct effective date of each GUST provision is clearly defined in the document.

Going back to T-Bone's question. if you are dealing with a document that generally has a 1997 effective date I guess he has the best solution. You definitely do not want retroactive 1997 effective dates floating out there for amendments that were not made until much later.

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Guest T-BONE

Thank you both for your responses. I think the easiest approach would be to have a prototype with a restatement effective date of 1/1/02, and only the GUST provisions would be retroactively effective.

My one concern (which may or may not be real/significant) regarding this approach . . . if non-GUST amendments were made between 1997 and 2002, and no determination letter was initially received on these amendments, will the GUST determination letter cover these non-GUST amendments for the years prior to 2002??

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This is the reason that some practitioners state a preference for the 1/1/97 general effective date. I _think_ that the IRS position on it is that since you are sending in documents since the last LOD was issued, that they are reviewing the plan for compliance since then. In fact, there have been other threads posted here indicating that the IRS seems to be going back farther than a plan sponsor wants them to. So, I'd say the likelihood is that they are reviewing back to the earliest effective date in the document.

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I agree I always send in every amendment since the last D.L. The extension of the remedial amendment period basically covers all changes to a plan since December 7, 1994. My experience is that the IRS will then specifically reference those amendments in the D.L. in addition to referencing the 1/01/02 restatement.

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Guest T-BONE

So as long as you include the non-GUST amendments made from 12/8/94 (effective date of GATT) through 12/31/01, you think the determination letter will cover these amendments on a restatement generally effective 1/1/02?

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