current year testing versus prior year testing method

[Guest Jane Freeman]

I know that during the remedial amendment period, you can basically choose whether or not to use the prior year or current year testing method with no limitations. What I would like to know is if the plan uses the current year testing method for the 2001 plan year (last year of the remedial amendment period - the plan will adopt it's GUST restatement in 2002), can the plan use the prior year testing method in 2002? Do any of the limitations apply to switching to the prior year in the 1st year after the remedial amendment period?

Any help will be appreciated.

Jane Freeman

[Archimage]

You can use either method up to the point that the Employer adopts its GUST restated plan document.

[Guest Joe Vasko]

The testing method you elect in 2002 will also be the same tesing method in future years unless the plan is amended.

[Guest Jacque Jenkins]

Allow me to be sure that I understood the response. You can use either current year or prior year for the 2001 test. The actual election for GUST purposes would be made for the 2002 test?

In Jane's example, the plan could use the prior year testing method in 2002 even though the current year method was used in 2001?

[Mike Preston]

Isn't this the best reason to sign a certification from a provider that hasn't yet received its determination letter from the IRS with respect to its pre-12/31/2000 DB plan? At the least it extends the RAP until sometime in 2002. Heck, it might even be 2003!

[Guest Boilerburm]

Jacque, theoretically, you are correct. The issue as I see it comes in making your document reflect what was actually done, as is required. The prototype we use (a very dominant player in the document provider industry!) has a space to indicate what testing was used in 2000, and a blank line after that to be used to detail the 2001 method. There doesn't appear to be any more space to detail 2002 in this prototype, so you theoretically are going to be using the same method in 2002 as you did in 2001 unless, as pointed out by Joe Vasko, an actual amendment is done. At least that is the way it appears to me!