414(h) pick-up plan amendment that does not provide for irrevocable el

[Guest MA Smith]

I recently discovered a pick-up amendment that permits employees to select among a range of 2-5% but does not state that the election is irrevocable. This amendment is several years old and I am not sure how to correct this problem.

[Carol V. Calhoun]

Do you have any idea of whether people have actually been permitted to modify their elections? Although not part of formal IRS policy, it has been our experience that IRS people are often willing to give governmental plans the benefit of the doubt if the plan document is deficient, but actual practice has been in accordance with the requirements.

Also, remember that revocability of a pick-up is a tax issue, but not a qualification issue. Thus, the IRS could come back against you for past years, asserting either individual income taxes or employer withholding taxes. However, unlike a qualification issue, it does not have to be corrected retroactively in order to get favorable tax treatment for contributions made after an amendment which inserts the proper language.

[Guest MA Smith]

Thanks for the response! I am not sure to what extent there were actual election changes, but I will follow up on that issue. I was concerned that the mere fact that the document did not clearly prohibit the change of election that there would be constructive receipt even if no one actually made a change in their intial election.