Determination Letter Application

[Guest lvegas]

Assume plan (not VS or M&P) has been amended to make major change to its structure not dictated by legislative developments. When should determination letter application be filed? Wait until the new staggered system says to go ahead? Or ASAP?

[mbozek]

It depends. If the change affects nondiscrimination, participation or other qualificiation aspects of the plan then the amendment should be submitted for the year in which it occurs in order to make any changes required by the IRS. If the change does not affect the qualified status of the plan then there is no need for immediate review by the IRS.

[JDuns]

I agree with Mbozek but I generally approach the question with how "typical" the changes are. If they are standard language that have been approved frequently (so retroactive document changes would be highly unlikely), I would be comfortable not going in early. If the language is unusual or potentially controversial, even if the change doesn't affect testing, I would recommend going in early unless you are comfortable.

[Guest lvegas]

The amendment was discretionary and made after 12/31/01. To the extent it caused any qualification problems and therefore fit into 1.401(b)-1(b)(1), hasn't the plan's remedial amendment period been extended to whatever the EGTRRA deadline is per Rev. PRoc. 2004-25 even though the amendment wasn't based on that legislation? Depending on the plan's TIN, this could be as late as 1/31/2011 potentially under what is proposed in Ann.2004-71 (draft Rev. Proc. for staggered RAPs), right?

[Guest Patrick Foley]

I tend to agree with lvegas that Rev. Proc. 2004-25 is broad enough to permit retroactive amendments to fix any amendment adopted after 12/31/01 that disqualifies the plan, whether or not it is related to EGTRRA or other new requirements. It extends the RAP for all "disqualifying provisions," defined for an existing plan as "an amendment... which causes such plan to fail to satisfy the requirements of the Code applicable to qualification of such plan as of the date such... amendment is first made effective."

Mbozek, your post seems to take the opposite view. Can you elaborate?

[Alf]

1) You don't want to wait until 2011 to find out that you have to correct 2004 allocations. Just because the IRS will allow you in 2011 to go back 7 years doesn't mean you want to. If there is a chance that he IRS will require retro changes I want to know about it sooner rather than later.

2) Your application should still be pending when the IRS opens EGTRRA and they should allow you to convert it to add EGTRRA.

[Guest Patrick Foley]

I agree with you, Alf, that the practicalities often make it desirable to file for a determination letter right away even if there's no concern about the remedial amendment period. But to weigh the cost and benefit of filing now as opposed to later, I want to be sure that the option of waiting to file later is really there. Some amendments have very little practical effect on administration but may raise a question as to one of the hypertechnical oddities of qualification.

[Alf]

RP 2004-25 states "the remedial amendment period with respect to all disqualifying provisions of new plans, that is, plans that have been put into effect after December 31, 2001, and all plan amendments adopted after December 31, 2001, that would cause an existing plan to become disqualified, will not end earlier than the EGTRRA remedial amendment period."

We understand that this is as broad as the GUST rule was which included all plan changes, even non-law change related ones.