IRS challenges "every participant is own allocation group" under audit

[Guest jscarecrow]

I utilize an off-the-shelf volume submitter software package with an IRS opinion letter on the pre-approved language. One of the design options is to make each participant their own allocation group with the allocation rate defined as a "pro rata" amount of the compensation of each participant in the group. I recently submitted this document to the IRS in the context of a proposed correction under audit and was told by the EB Manager that the plan was not qualified and did not contain a definitely determinable benefit. I was informed that an amendment to the plan would have to have been made each year to define the actual allocation?!? I am not interested in challenging this or becoming a "test case" for the service. Any thoughts on this unusual outcome??

[chris]

Was the IRS personnel clear that an amendment had to be made...? I know the e/er has to notify the trustee each year of what the allocation will be for each group. Maybe that is what they are referring to......

[Guest jscarecrow]

Yes; I described the Trustee notification in detail and the representative of the IRS was explicit that an actual plan amedment would need to be done for each plan year that provided the exact benefit by group. Unprecedented to my mind.

[Guest SuzanneW]

Wondering if you had heard anything yet?

[Alf]

We had to set up one with annual amendments to get a determination letter once, but not since.

[ak2ary]

I don't think the EB Manager is up to speed... three choices

Fight

Ignore in the future

Comply

It seems like you could win the fight but, if youre drafting a detailed board resolutioin each year, why not call it an amendment anyway?