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Retroactive amendment that is not corrective


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A plan client wants to make a retroactive amendment going back to the beginning of the 2021 plan year that is not corrective of a plan document failure, operational error or discrimination violation. This is a voluntary retroactive amendment to add additional accrued benefits to NHCE plan participants. Thus there are no anti-cutback or discrimination concerns. Shouldn't this retroactive amendment be permissible with no need to rely on SCP or 1.401(a)(4)-11(g) since this is not a correction of a plan or operational violation?

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Thank-you for referring me to the prior post. Pursuant to this prior post it seems additional plan contributions were made in  2021 and the plan language did not support this so a retroactive plan amendment to 2021 was justifiable under SCP since this arguably is a correction of an operational failure.  

However, I have a different set of facts. The client is a DB plan that wants to amend the plan retroactively to 2021 to increase the accrued benefit formula to benefit NHCE's starting in 2021. So I don't see this as a plan document or operational failure so can the plan sponsor justifiably make an amendment in 2022 to retroactively increase the accrued benefit formula in 2021? It seems the IRS wouldn't challenge it since it is benefiting NHCE's and there are no anti-cutback concerns. But the retroactive amendment part concerns me since 11(g) and SCP are arguably not applicable

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What purposes does the sponsor want the amendment to be retroactively effective for?

If for 401(a)(4) or 410(b), you can do it as a 1.401(a)(4)-11(g) amendment, although you indicated that there was no coverage or nondiscrimination failure that would need correcting.

If for 401(a)(26), you can do it as a 1.401(a)(26)-7(c) amendment, which operates under similar rules to -11(g).

If for minimum funding/maximum deduction purposes, too late. The deadline to adopt a 412(d)(2) amendment for 2021 was March 15, 2022.

If none of the above: then just make the amendment effective in 2022, and give them credit for 2021 for accrual service.

Free advice is worth what you paid for it. Do not rely on the information provided in this post for any purpose, including (but not limited to): tax planning, compliance with ERISA or the IRC, investing or other forms of fortune-telling, bird identification, relationship advice, or spiritual guidance.

Corey B. Zeller, MSEA, CPC, QPA, QKA
Preferred Pension Planning Corp.

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