Mark Dray's letter to IRS about timing of CRA amendment

[Dave Baker]

Prominent ERISA attorney Mark Dray wrote a letter to the IRS airing his concerns about the need to make plan amendments for "CRA" (the definition of 415 comp as affected by qualified transportation fringe benefit plans -- even if the plan sponsor doesn't have such a fringe benefit plan):

http://benefitslink.com/articles/dray20020909.pdf (should be a clickable link; requires Adobe Acrobat Reader to view - see http://www.adobe.com if needed)

Do you agree with his point that the IRS shouldn't be requiring CRA amendments as part of the GUST amendment process?

[jpod]

On the one hand, we, as practioners, had plenty of notice of the IRS' position, so we should have advised our clients to amend again to add the CRA language, whether or not they had 132(f) plans or intended to adopt them. I did about 50 one-paragraph "CRA amendments" this year for plans that already had GUST I letters. I did not advise these clients to apply for new letters just because they had to adopt CRA amendments or did not have GUST II letters.

One could be cynical and wonder whose skin the author is trying to save: the professionals who may be accused of professional malpractice, or the clients?

On the other hand, I agree that the CRA language should not be required if it is irrelevant, and if the IRS really tried to disqualify a plan for an alleged failure to "timely" amend to add irrelevant CRA language, or to exact an audit CAP sanction, it would never stand up in court or in Congress, and in fact I doubt that higher-ups within TEGE would ever seriously consider going to the mat on the issue.

[mbozek]

I seem to recall that similar arguments were raised regarding the application of the top heavy rules to non profit employer plans and plans of publicly held co. which would never become top heavy. The IRS did not exempt employers from the statutory requirement on the ground that it did not currently apply. They were concerned that it could apply in a future year- therefore the language had to be in place effective January 1, 1984. It doesn't seem to be to big a deal to require that the plans be retroactively amended without sanctions to add this amendment since its absence is no harm no foul.