Effect of statute of lim's on failure to amend and restate??

[chris]

I had someone suggest to me that a non-amender could amend and restate currently and be OK as long as the 3 year statute of limitations goes by without the IRS auditing or picking up on it..... I know the filing of the Scedule P of the 5500 starts the statute running with respect to the trust arrangement of the plan, but does that apply to the qualified status of the underlying plan document as well? Didn't necessarily sit quite right...... Any comments on this?

[jaemmons]

The statute of limitation is a ridiculous argument for not properly amending the plan. The IRS can always open up the "books" on a plan if they feel it is necessary. That said, even if at some future point, if the IRS audits the plan and finds reason to believe that the plan was not properly amended for GUST, they can request a copy of the prior document. If the sponsor does not amend timely, they obviously do not have an IRS qualified opinion or individual determination letter with respect to the "form" or plan language, since they only have to September 3, 2002 to submit "non-amender plans for an IRS DL (Rev Proc 2002-35), and

should the IRS discover defects within the document and how they are applied administratively, you do not have a DL "ticket" to use, in order to use most of the correction programs under EPCRS (as amended by Rev Proc 2002-47). Therefore, they could be potentially put the sponsor's plan qualification in jeopardy for attempting to circumvent proper restatement procedures.

With the "new and improved" EPCRS program, why not just restate now and submit for a DL. Without a DL at least on the form of the plan, the sponsor loses out on 99% of the available correction methods should a plan "defect" be discovered down the road. Good luck!

[MGB]

This is the most ridiculous thing I've heard during 25 years in this business. The person suggesting this has no idea what they are talking about.

[mbozek]

Perhaps the person you spoke to was referring to the 3 yr s/l for disallowing deductions if a plan is disqualified. Under the IRC employer deductions can be disallowed for the last 3 yrs tax returns (6 yrs if the deduction exceeds 25% of gross income) if a plan loses its qualified status, e.g., for failure to amend. However, deductions taken on tax returns beyond the S/l can not be disallowed on account of plan disqualification. However, filing for a determination letter is not the filing of a tax return and the IRS can disqualfiy a plan back to inception. .