ESOP: Retroactive amendment

[Guest qualified plan]

Any thoughts on Notice 2002-2's requirement that under Q&A 10 that effectively says that a 401(k) plan cannot be amended retroactively to become an ESOP (at least for dividend purposes).

Is this a new requirement that overrides the remdial amendment rules?

Any thoughts?

[RLL]

IRC section 404(k), which provides for the ESOP dividend deduction, is not a qualification provision to which the remedial amendment rules apply. The rule set forth by IRS in Notice 2002-2 (that a plan must be designated and qualified as an ESOP on the dividend record date) is a reasonable interpretation of the statute. There is no valid reason to allow a 401(k) plan to be retroactively designated as an ESOP for purposes of section 404(k).

[Guest qualified plan]

Thanks RLL--

I guess I was surprised that 2002-2 took this position not just with respect to the new dividend scenario (i.e., getting a deduction for providing participant elections) but also, appraently with respect to the old scenario (i.e., getting a deduction for paying the dividends out to participants).

Are you aware of any other guidance that imposed this rule on the old scenario?

Also, do you have any sense as to what a "reasonable opportunity" means w/r/t participant elections (30 days? 45? 60?)

[Guest dmj1998]

where can i view notice 2002-02 online?

[RLL]

Hi dmj1998 ---

Try the IRS web site.

[stephen]

You can also access it via BenefitsLink. (Do a search from the home page)

[Guest dmj1998]

RLL - thanks for the tip, but searching the irs website is an exercise in futility. thank goodness for benefitslink.

[RLL]

Hi dmj1998 ---

I must admit that stephen's suggestion (to use BenefitsLink) was much better than mine.

You are certainly correct that dealing with the IRS website (or...now that I think about it...by telephone, by mail or in person) can be an exercise in futility.

I hope I'll do better next time.