Last year for selecting Current Year/Prior Year Testing

[Guest AdminFL]

Is calendar year 2001 the deciding year for selecting the current or prior year testing or has that been extended to 2002?

[Archimage]

2001 would actually be your last year unless you updated the docs for GUST in 2001. Since all docs have to be amended this year, it will be hardcoded for 2002.

[Mike Preston]

Notice 98-1 states in Section VII

"Accordingly, a plan is permitted to change from the current year testing method to the prior year testing method in any of the following situations:

...

4. The change occurs during the plan's remedial amendment period for the SBJPA changes (see Rev. Proc. 97-41). "

Since the RAP has been extended through at least 2/28/2002, and in most cases until at least 12/31/2002, and in some cases maybe sometime in 2003, I think a calendar year plan that amends during its RAP can select whatever they want for any year up through the year that includes the end of its RAP.

I seem to recall that the IRS takes the position that a plan that updates for GUST before its deadline is deemed to have closed its RAP. So, if a plan has adopted a GUST-approved plan before the end of 2001, I'm not sure that the general RAP extensions referenced above would allow such a plan to change methods in 2002.

Unless, of course, the IRS has updated 98-1 specifically with respect to this issue such that there is a restriction of some sort. I'm not aware of any such restriction, but I haven't researched it, either.

One thing that I've not seen clarified is when changes may be made effective. If one wants to change methods it is clear from 98-1 that an amendment must be made to the plan. So, assume that a plan sponsor wishes to change from prior year testing to current year testing for the 2004 year. Must that amendment be adopted before the 2004 year? During the 2004 year? During the regular RAP with respect to the 2004 year? Under EPCRS, sometime before the end of the second plan year after a failed ADP test, which in this case would be by 12/31/2006?

[Guest AdminFL]

Thank you for your responses.