GUST Amendments and Terminated Plans

[davef]

What is the deadline for adopting a GUST amendment for a terminated plan? I have a situation where the plan's termination date was 2/1/02, the GUST amendment was not done until May '02 and the 5310 filed sometime after that. The plan is a prototype plan that would have had an extended RAP but for the termination. The IRS is saying that the GUST amendment should have been adopted by 2/28/02 and that it is now a non-amender.

Looking at Rev. Proc. 2002-6 (sec. 12.06), it seems to say that a plan can be amended after its termination date in order to get a determination letter. Wouldn't this apply with respect to GUST amendments?

Any help would be appreciated.

[mbozek]

A Q plan must be in conformance with all provisons of the code in effect on the date of terminaton. This means that all gust amdendments must be adopted as of the date of terminaton. P type plan sponsors make a termination amendment kit available for plans which terminated prior to the gust amendment date.

However, since a q plan is submitted to the IRS for a determination that it meets all the requirments for qualfication it should be permitted to be amended for any gust amendments required as of the date of terminaton. The question is whether the amendments can be retoactively effective back to the date required under the IRC even though the remedial amendment period expired on 2/28/02. The IRS is focusing on the issue that the plan should have been amended for gust prior to its termination not after because the plan must be in conformance with all IRC provisons in effect on the date of terminaton.

[chris]

Have the assets been distributed or is distribution contingent on getting a determination letter? Also, in the past I had an occasion where the plan was amended as of date of termination, but one provision was overlooked. In that instance, the IRS pointed out that they wanted that provision to be added to the plan language prior to issuance of a determination letter. Also, Some time back the IRS would provide model amendments for employers to adopt after the plan had been terminated, i.e., corporate resolution adopted to terminate plan as of date 1, plan submitted to IRS on date 2, and IRS forwarded model amendments to be adopted on date 3 effective as of date 1 at their direction. Maybe with all of the GUST hoopla they are being more stringent??? I would agree with your take on 2002-6.

[davef]

A number of years back, in connection with TRA-86, the IRS issued Notice 87-57, which said that a terminating plan had to be amended "no later than the termination" to comply with TRA-86. Currently, under Rev. Proc. 2002-6, all it says is that the plan must be amended "in connection with the plan termination" to comply with current law, which could be interpreted as a softening of the IRS' position taken in Notice 87-57, since there doesn't appear to be a "no later than" requirement anymore.

Assets have not been distributed yet -- which could support an argument that the plan isn't "officially" terminated unitl they are paid out. Also, since contributions were frozen in conjunction with the termination, would it be possible just to move the termination date without any adverse impact on the plan?

[Blinky the 3-eyed Fish]

What benefit would be gained by moving the termination date?

[davef]

You could move the plan termination date past the date the amendment was adopted, so that the plan would be considered amended for GUST as of its termination date.

[davef]

To follow up on my previous post, I talked today with the IRS about this issue and they said that if the prototype plan was entitled to an extended GUST RAP prior to the termination (in accordance with Rev. Proc. 2000-20), the GUST RAP stays the same. The termination will not accelerate the expiration of the GUST RAP, so that GUST amendments can be adopted after the termination date. Word to the wise -- to avoid any problems when you file the 5310, you should also provide some evidence that the plan is entitled to the extended RAP, such as a prior AA or certification (this is actually covered in Rev. Proc. 2002-6, sec. 6.10).