Wrong definition of compensation in GUST restatement

[nancy]

We have a plan that had the wrong definition of compensation written in the GUST restatement. The prior document excluded bonuses and the employer did not intend to change. The plan was amended in 2004 when the error was discovered. I know the IRS does not recognize scrivener's errors. However, if we go back and correct the allocations for the years in question it will result in a reduction of benefits for the NHCEs. Has anyone had any experience with this and the IRS?

[mbozek]

Under the cutback rule a plan amendment cannot reduce account balances of participants. You can only change the definiton for 2005

[nancy]

It's not the amendment that would cutback the allocations. It would be correcting the allocations to base them on total compensation vs base pay.

[mbozek]

will you please explain how it would not be a cutback? Your initial post stated that correcting allocations for years in question will result in a reducton in benefits which is a cutback to me. I thought the plan was revised to include all bonues in the definiton of comp which were excluded in the prior document. An example will be helpful.