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GUST Remedial Amendment Period Extended - what about EGTRRA good faith


John A
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Reywal, are you sure? An excerpt from Notice 2001-42 reads as follows:

• Good faith EGTRRA plan amendments must be adopted no later than the later of (1) the end of the plan year in which the amendments are required to be, or are optionally, put into effect or (2) the end of the GUST remedial amendment period. In limited situations, earlier amendment may be required to avoid a decrease or elimination of benefits prohibited by section 411(d)(6).

Rev. Proc. 2002-73 extends the GUST remedial amendment period to 9/30/2003 for most plans, so therefore the date required to adopt the EGTRRA amendments is delayed.

I believe the RMD amendments aren't needed until the last day of the 2003 plan year, so plenty of time for them.

"What's in the big salad?"

"Big lettuce, big carrots, tomatoes like volleyballs."

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I agree with you Blinky. However, the issue for some DC Plans is avoiding a possible cutback on top-heavy in which case you still must have the amendment in place by 12/31/02 for a calendar year plan. The EGTRRA RAP does not give you 411(d)(6) protection.

I think there were some other possible 411(d)(6) implications regarding the applicaiton of various other provisions if you don't have them in by the end of the plan year (such as the inrease in the comp limit for a plan that has a last day reqirement).

If you are not concerned about these issues, then I think that this, in effect, extends EGTRRA good faith.

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I agree 100% with Blinky as I had to do the research for this just one hour ago and, using the same analysis, came to the same conclusion. I only have to add that Notice 2001-57 modified Notice 2001-42 and has an even more succinct summary of the law (i.e, it doesn't have confusing references to disqualifying provisions, which always make you take a step back and scratch your head). Here is what 2001-57 says explicitly:

A good faith EGTRRA plan amendment is timely if it is adopted no later than the later of (i) the end of the plan year in which the EGTRRA change in the qualification requirements is required to be, or is optionally, put into effect under the plan or (ii) THE END OF THE GUST REMEDIAL AMENDMENT PERIOD FOR THE PLAN.

You'd think the IRS could do us a favor by putting in ONE LINE in the Rev. Proc. making all of this clear, but I guess that's too much to ask for.

:mad:

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I disagree with these analyses.

The good-faith amendments for EGTRRA are on the pre-approved plans. The GUST remedial amendment period has not been extended for the pre-approved plan. It has only been extended for the adopting employers. The adopting employers are not the ones that would be doing the good-faith amendments, it is the sponsor of the prototype, volume submitter or master plan that needs to do the good-faith amendments. Nothing has changed with respect to the deadlines of the sponsor.

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Seems to me something is being confused here. Or maybe I'm misreading the posts. MGB - suppose a VS sponsor is preparing EGTRRA amendments. The sponsor cannot unilaterally amend the VS document like they do in a prototype. And even a unilateral prototype EGTRRA amendment may require employer elections, such as which rollover provisions they wish to allow or not to allow. So the deadline for employer adoption of these amendments, ASSUMING the employer is already eligible for the GUST RAP, is extended. Does this reflect your understanding as well, or are you saying something different?

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MGB I thought that if a prototype sponsor amends the Plan for EGTRRA it is doing it on "behalf of" the employers adopting the Plan. Under the guidance it appears that the employers have until 9/30/93 so why would a prototype sponsor have a deadline to act before this on "behalf" of the employers.

Also, many EGTRRA amendments for prototype plans (an almost all for volume submitter plans) require an employer's signature. Are you saying for those plans as well the deadline is still before 9/30/93?

Here is the language from 2001-57

A pre-approved plan may be amended by the document's sponsor to the extent authorized. For example, a sponsor of an M&P plan may amend the plan on behalf of adopting employers. If the amendment of a pre-approved plan includes an addendum to the adoption agreement, the addendum is effective only if signed and dated by the employer.

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Our document provider has provided us with (1) a pre-GUST document and (2) a GUST document. The good-faith EGTRRA amendment (which does not require the adopting employer to sign anything) applies to (2) above. If, at the end of 2002, we are still on (1) above, we don't have the benefit of the good-faith amendment. Consequently, we must adopt (2).

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Guest jody303

I'm confused. I think I generally agree with Blinky and others about the timing for the adoption of good-faith EGTRRA amendments, BUT (assuming a calendar year plan year):

1. Didn't plan docs have to be amended at some point in 2002 (depending upon eligibility requirements to share in employer's contribution) to use the $200K 401(a)(17) limit in 2002?

2. Don't plan docs have to be amended by 12/31/2002 to allow for catch-up contributions, if they want to let participants make catch-up contributions in 2002?

3. Wouldn't a plan doc have to be amended in 2002 to allow a sole proprietor to take a participant loan in 2002?

4. Wouldn't a plan doc have to be amended in 2002 to allow for the receipt of rollovers from regular IRA's (not conduit IRA's), 403(B)'s, etc. in 2002?

5. Doesn't a DB plan have to be amended to adopt the new 94 GAR mortality table by 12/31/2002?

Are there other EGTRRA issues requiring amendment in order to implement in 2002? Any thoughts?

Like I said, I'm confused!!!

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Jody303--I believe that the answer to most of your questions is no because you have until the end of the EGTRRA good faith remedial amendment period to amend your plan to conform on how you have operated. Thus, you can operationally put in a provision and amend later as long as you do it by the end of your EGTRRA period.

Thus 2001-42 provides:

A plan amendment to a disqualifying provision described in this section III can be made retroactively effective within the EGTRRA remedial amendment period to the extent necessary either to satisfy the qualification requirements as amended by EGTRRA, as interpreted in published guidance, or to make the plan provisions consistent with plan operation. To the extent necessary, such a remedial amendment may be made retroactively effective as of the effective date of the "good faith" EGTRRA plan amendment or, where the plan provision automatically reflects the EGTRRA change, as of the effective date of the change.

However, unlike other remedial amendment periods EGTRRA does not give you 411(d)(6) relief for a retroactive amendment. Therefore some of the points you raise are valid.

For example if a dc plan would not be top-heavy post-egtrra but would be top-heavy pre-egtrra you need your amendment in by the end of the year because you cannot retractively take away that top-heavy minimum that would accrue to your non-keys under your pre-EGTRRA plan.

The $200K issue is an interesting one. Suppose a plan has a last day of the year requirement for an allocation. If an employer has only $X to put into the Plan then obviously certain individuals will be allocated more and certain individuals will be allocated less if the compensation limit is raised to $200,000. Therefore, I would think that at the end of the Plan Year all employees have accrued a a contribution based on an allocation formula that limits comp to $170,000. Therefore you would need an amendment by the end of the year to avoid a cutback.

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This was on Benefits Link today posted by SunGuard Corbel

11/21/2002: GUST Extension Doesn't Address Anti-Cutback Problems; Amending by 2002 Year-End Might Be Prudent (SunGard Corbel)

Word on the street is that the IRS believes Rev. Proc. 2002-73 also extends the time for adopting good faith EGTRRA amendments to plans eligible for the extended GUST remedial amendment period under Rev. Proc. 2000-20, but because no section 411(d)(6) relief is provided for the EGTRRA amendments, top-heavy amendments would have to be adopted by the end of 2002 to avoid a prohibited cutback under a top-heavy plan if existing top-heavy provisions were not amended until after the 2002 year-end.

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