Contributions Before Effetive Date of Plan

[austin3515]

Effective date of the Plan is 1/1/00.

Employer executed an "ad hoc" amendment to provide a one time contribution to all participants employed on 12/31/99, provided they have met the Plan's eligibility requirements as 12/31/99. The contribution is based on compensation as of 12/31/99.

Can a plan have such a contribution before the effective date of a plan?

It seems to me that this is an effort to circumvent the requirement that a plan must be executed before the end of the year. Has anyone seen this before? Are there any PLR's either for or against this, or regulations?

I did find this:

§1.401(b)-1. Certain retroactive changes in plan

See the last sentence.

(a) ... Section 401(b) does not permit a plan to be made retroactively effective, for qualification purposes, for a taxable year prior to the taxable year of the employer in which the plan was adopted by such employer.