Adoption of plan with retroactive effective date

[Guest JDL]

I've been trying to find information regarding whether a company can adopt a db plan with a retroactive effective date. For example, could a company as of January 2003 adopt a calendar year db plan with a retroactive effective date of January 2002?

I have been unable to find any direct information on this matter. I would think that the company could do this provided that they make the necessary minimum contribution for the 2002 calendar year before before the minimum contribution amounts become due ( I think they have up to 8 1/2 months after the end of the plan year? ).

Any ideas, and/or suggestions? Thanks for any assistance!

[AndyH]

You can only go back to a date in the plan year, so on February 2, 2003 you could go back to 1/1/03 if the plan year were calendar, or you could run a plan year from 2/3/2002 to 2/2/2003 if you wanted to, but I don't know why you would want to do that except in the old days when insurance plans were written that way, so that the first day of the plan year would be equal to the effective date of the insurance contract.

[Guest JDL]

Thanks for the response. Where is the information you cited found? Is it in a reg or PLR? I may be clueless, but I have been unable to find sources discussing this. Thank you once again!

[mbozek]

IRS position is that plan must be established by last day of employer's tax year in order to claim a tax deduction for that year. See Rev rul 80-114. Also a plan with an effective date of 1/1/03 could to grant benefit accrual for service prior to the effective date of the plan ,e.g., 1/1/02.

[david rigby]

As pointed out by mbozek, the correct revenue ruling should be 81-114,

http://www.taxlinks.com/rulings/1981/revrul81-114.htm

[Guest snorthup]

Do you have any authority on this topic? Any treasury regs or code which states that you can adopt a plan at any time during the tax year and have it effective as of January 1?

Thanks!

[Mike Preston]

Code Section 401(B).