401(a)(4) Corrective Amendment

[Dougsbpc]

A calendar year employer adopts a non-safe harbor defined benefit plan January 1. Some employees leave the company by mid year without accruing a benefit and the plan fails 401(a)(4) by December 31. Can the employer provide additional benefits to a group of currently eligible NHCE's to pass 401(a)(4) for the first year of the plan? 1.401(a)(4)-11(g) does not seem to say you cannot. It only appears to indicate you cannot have a pattern of such amendments.

I seem to remember reading something about corrective amendments being questionable in the first year of a DB plan.

Anyone know about this?

Thanks.

[Guest RSNOW]

I don't know anything about a special rule for first year of a plan, but in general, if your plan document does not have "fail-safe" language that dictates the methodology for resolving discrimination failures, then I don't see why you can't customize a corrective amendment that corrects the discrimination failure using only current employees (assuming the math works). Perhaps the 1st year issue may be in reference to a situation where a IRS determination letter was requested on both the plan document language plus a ruling on the 1st year discrimination test, and now your benefits have been modified from what you submitted to the IRS and received a ruling on. I would think that might invalidate the discrimination approval paragraph in the IRS approval letter, but not sure it jeopardizes the overall approval letter on the plan document qualification language. That's the only thing I can think of.