IRS wants my HCE definition to "affirmatively" elect use of

[Guest kjungkin]

I've been responding to the IRS on several individually designed plans and I have gotten a couple of requests to modify the language I use for HCE definition to "affirmatively" elect use of the top-paid group. I have been using language similar to Pamela Perdue's in her volume submitter plan in her treatise, and am not sure what the IRS wants as an affirmative election--do I need to state that the employer affirmatively elects to limit the HCEs to the top paid group? Has anyone else run into this on individually designed (as opposed to prototype with adoption agreement) plans?

[Guest wendycatherine]

I also draft plans and got this comment for the first time last week. I have gotten several favorable determination letters on the same language before. However, Notice 97-45 states that if an employer wants to make a top-paid election, it must write it into the plan. Possible argument against: notices do not carry sufficient weight?

[Guest BENEFITS STUFF]

I can remember conferences as early as 1998 where IRS took this position that top paid group, calendar year, current year/prior year ADP elections must be made in plan and that the you could not simply put in that the employer "may" make the election.

In early GUST terminations back in 1998 or 1999 I think people were using such "elective" language and were getting determination letters. However, since 1999 my understanding is that the IRS is checking this.

In fact, it is on IRS' website as one of the more common errors in the determination letter process.

http://www.irs.gov/retirementplans/display...%3D6928,00.html