Retroactive Amendment to Add Related Employer?

[Guest Cricket1]

I have a plan who added a related employer last year operationally but never formally amended their adoption agreement to reflect this. This employer will be added as part of their restatement for GUST but what corrective action, if any would need to be for this?

[austin3515]

Why sponsors don't think before they act sometimes is beyond me! Well they think, but they think "what's the big deal!"

Two quick thoughts -

1) Make sure that related employer wasn't already included anyway - many docs indicate that any members of the controlled group are eligible to participate. That would of course create a different problem - exclusion of eligible employees. Or maybe not, if they were newly added to the controlled group - i.e., acquisition.

2) Check out IRS revenue procedure 2002-47. I don't know what it will say about this specifically, but that is the correction program set up by the IRS. I should think this is a common problem that receives due attention in there.

3) Make sure you don't have a multiple employer plan (i.e., more than one controlled group participating). If Company A owns 60% of Company B - less than 80% threshhold), but both A and B are in the Plan this would, I believe, be a multiple employer plan. The trouble with this is all testing must be done twice - once for each controlled group.

[Guest Cricket1]

Thanks for the info. However, I tried going through 2002-47 and really could not seem to find the answer or direction I was looking for.

If they failed to add it to the adoption agreement, could you go so far as to say that allowed ineligible participants into the plan?

Their document allows them to specify which related employers participate in the plan.

[austin3515]

Does the plan mandate the form of the adoption?

I guess I'm a little out of my league on this one, so don't quote me.

I shouldn't think it would be to terribly aggregious to just draft an adoption agreement and sign it retroactively. There oughta be enough paperwork substantiating the adoption - notices to employees, etc. Again I'd run that by a lawyer, but that's my thought...

Lets be frank, its not like we stole money from grandma!