I'm filling out a new adoption agreement (PSP)... for GUST. Can I sw

[Moe Howard]

A non-integrated PSP became effective back in 1995.

The GUST adoption agreement, has a section where I must elect ...either Non-integration or Integration.

The highly paid owner participant would love to switch the plan to Integrated by use of the GUST adoption agreement ..... but it seems to good to me.

Can a non-integrated plan switch to integrated, simply by elceting to do so in the GUST adoption agreement ??

If yes, when is such an election effective? What about the fact that the contributions for years 1995 - 2001 were computed on a non-integration basis. Do any years now have to be retroactively amended ?

[mbozek]

If you think this thorugh the gust amemndments are applicable only to those provisions of the IRC which were amended between 1994 and 2000 by prior legislation for which the remedial amendment period of IRC 401(B) has been extended. Only those provisons can be retroactively amended in 2002 as of the year the amendment became effective. Adoption of an integrated benefit formula would be effective only as of the year it is adopted because the cut back provision of IRC 411(d)(6) prevents a reduction of accrued benefits for years prior to the date of adoption of the amendment. In some plans the benefits may have already accrued for 2002 and an integrated formula cannot reduce benefits accrued or due before the formula is amended.

[Guest merlin]

Moe,the formal basis for mbozek's answer about the anti-cutback issues is found in TAM 9735001,which says that once a participant has satisfied the allocation requirements for the year the allocation basis must be guaranteed. But there may be hope yet. What are the allocation requirements in your pre-GUST plan? If you have a "last day" rule and you're still within the plan year you're OK. But watch out for allocations to participants who have retired, died or become disabled. Many plans give them allocations regardless of hours worked or employment at EOY.It's my understanding that the Service interprets the TAM to say that once any participant has satisfied any allocation requirement,any change to the allocation basis is a cutback.

On the other hand, if you're amending a standardized prototype that give allocations to any participant who has worked 501 hours you're probably sunk anyway.

But no matter what, even if you can't make the change for the current plan year, I think that with proper drafting you could incorporate the language now, to be effective for the next plan year.