Remedial Amendment issues with EGTRRA and GUST

[Guest jig]

I believe that there are potentional 411(d)(6) problems if an EGTRRA amendment was not adopted by 12/31/02 even though the time for adoption of the EGTRRA Amendment has been extended with the remedial amendment period for GUST.

I know of a plan which has a signed certification to adopt a volume submitter plan and therefore has the extended GUST remedial period, but they haven't yet signed an EGTRRA amendment. It's a DC plan with employees and may have cutback issues.

Has there been any guidance regarding this cutback issue? Does anyone have any ideas with regard to how to handle a situation like this? Thanks.

[Alf]

Yes. The IRS has recognized the issue, but not many have focused on it. See the subsection on "Section 411(d)(6)" in Part III of IRS Notice 2001-42. Also, I think that Corbel had a news item on this issue late last year on their web site. Top-heavy plans are an issue because of all of the changes in those rules, but otherwise, it is the compensation limit change that can cause problems if a contribution is not a fixed percent of compensation and some employees earned between 170 and 200K. The answer is to use the old 170K compensation limit for 2002 (and part of 2003 if there is no 1K HOS or LDY allocation requirement) and don't use 200K until the amendment is signed. Other than top-heavy and compensation, I don't think that I have heard of anything.

[Blinky the 3-eyed Fish]

At the LA Benefits Conference the panel that included Dick Wickersham and Jim Holland explicitly said they did not perceive adopting the EGTRRA increases in the 401(a)(17) and 415 limits after the right to an allocation had been earned a 411(d)(6) cutback. I realize this is not binding, but a look into what they are thinking at the IRS.