Terminating Plan Document Update

[Blinky the 3-eyed Fish]

Can I get a yea or nay on whether a terminating volume submitter DB plan needs to have the document updated for the 2002 final and temporary minimum distribution regulations? I can't determine a definitive answer from Rev. Proc. 2003-10 or Notice 2003-2, which clearly suspends the requirement for active plans.

[mwyatt]

Hey Blink:

I'll give you a "practical" answer (maybe not to the letter of the law). You did state VS document; I'm assuming your provider has approval on the GUST document language and then provides you with the ability to generate a separate EGTRRA/et al catch-up amendment (and if they didn't and weaved the new language into the approved document, they just hosed their VS letter). Submit the signed GUST document, your 2002 orignal EGTRRA amendment, and an unsigned proposed final catchup amendment and let the reviewer tell you what he wants in order to get the DL.

[Blinky the 3-eyed Fish]

The only problem with that is the plan is not being submitted to the IRS.

[Everett Moreland]

I vote update. I view the suspension as comparable to extension of the remedial amendment period. A terminating plan needs to be current even for law changes for which the remedial amendment period has not expired.

[mwyatt]

If not submitting, then definitely have your client sign the latest, greatest amendments available to you from the VS provider. As Everett said, you need to cover required language even after the termination date (we had a DB plan that terminated in 2001 that the IRS reviewer came back and required the EGTRRA amendment, even though it didn't affect benefits).

[KJohnson]

I say update as well based on the above.

Actually I recently submitted a dc plan that terminated on 12/31/02. We had GUST and EGTRRA but the agent has asked for a final 401(a)(9) amendment. In terminations I usually just go ahead and do what the agent wants as long as it does not change anything substantive. However, this time I told them that the 401(a)(9) was not reuquired because the Plan was terminated prior 1/1/03. I have not heard back yet.

[mwyatt]

Actually, I could see the reviewer's point for the 401(a)(9) amendment. Even though your plan terminated prior to 1/1/2003, you probably haven't distributed funds yet. Therefore, distributions could fall under the new '03 final regs (at least hypothetically if you had someone over 70 1/2).

[KJohnson]

Of course I meet be reading to much into it, but I always thought that this statement from Rev. Rul 89-87 meant that you did not have to comply with new law that is effective after the date of termination as long as you distributed assets as soon as possible .. .

A plan under which all assets are not distributed as soon as administratively feasible is an ongoing plan and must meet the requirements of section 401(a) of the Code, in order to continue its qualified status

It would seem that the corrolary would be that a plan whose assets have been distributed as soon as adminstratively possible does not have to meet the requirements of 401(a)..again I may be reading to much into it.

[mwyatt]

Well, assuming this was a small plan and your owner was the one subject to 70 1/2, I would think that you would want to take advantage of the improved life expectancy tables effective for 2003 (to minimize the amount that actually had to be recognized at income).

As I stated before, the IRS has been asking for the EGTRRA amendments on cases with pre-2002 termination dates. Best not to "rock the boat" (especially when you're not filing for a DL) and make sure that you have all conceivable amendments in a row, even if not relevant, in case of future audit.