Amendment to Comply with Final 401(k) Regulations

[smm]

OK, I've been waiting for someone else to ask this question and no one has. Either the answer is obvious or no one is paying attention. The question is when is it necessary to amend an individually designed (non-safe harbor) 401(k) plan to comply with the final 401(k) regulations. Some of the changes in the final 401(k) regulations are EGTRRA changes, and thus, (at least I think) do not have to be made until the end of the applicable EGTRRA remedial amendment period. What about the other changes (i.e., safe-harbor hardship distribution, ability to no longer do bottom-up QNECs, definitiion of successor plan following plan termination, treatment of a participant with 401(k) deferrals as fully vested for 411 purposes, etc). Assuming that a plan did not elect to follow the regulations in 2005, is is necessary to adopt an interim amendment by the end of the current (non-EGTRRA) RAP????? by some other time?????

Also, for those of you with M/P plans. Are you providing your adopters with interim amendments while the IRS reviews your restated plan???

Thanks.

[namealreadyinuse]

They are currently due by 12/31/06 for provisions that will be utilized or are mandatory. Even for the EGTRRA changes, good faith amendments are required in the year used. I would expect an extension or some band-aid IRS good faith model amendments by mid year.

[smm]

The IRS said (I think in 2005-66) that they will not be issuing a model amendment for the final 401(k) regulations. I similarly think (or hope) that the IRS will issue a extension b/c it seems crazy to invest the time in a detailed amendment only to have to revise it again when the plan is restated in its entirety for EGTRRA. I don't see why any interim amendment would have to restate what is already in the EGTRRA good faith amendment that was adopted 2 plus years ago. For example, per the EGTRRA good faith amendement, distributions are permitted pursuant to a severance from employment. Why revise it again?

[Bird]

Yes, they are so far maintaining their position that they are due by the end of the 2006 plan year. We're going to wait as long as possible (based on experience and the level of discontent in the industry that we hope will lead to a change of heart).

[sloble@crowleyfleck.com]

Anyone have any resources for an interim amendment for the final 401k regs. According to the May meeting of the JCEB/IRS, it sounds like the IRS is not changing its position that interim amendment is required by the plan sponsor's tax filing deadline for 2006. http://www.abanet.org/jceb/2006/JCEBQAwithIRSfor2006.pdf (see q/a 8)

[Kevin C]

Most of the document providers have already released good faith amendments. If yours hasn't or if you don't use prototypes or volume submitter documents, Corbel has one available for a one time charge.

[sloble@crowleyfleck.com]

Thanks--we have an individually designed plan. I checked with Corbell and their interim amendment is $400. I may wait and see if the IRS comes up with a good faith one for free! We have until July 30 2007 for calendar year plans, correct?

[Guest Pensions in Paradise]

You'll be waiting a long time. The IRS has stated that they will not be issuing a model amendment for the 401(k) regulations.

[smm]

A lot has happened since I began this thread in February. My understanding is that the IRS will not be issuing a model 401(k) amendment. The due date for 12/31 plans is 12/31/06. $400 is a bargain for an amendment, however, in my opinion, you get what you pay for.....why would you want to use a Corbel amendment for an individually designed plan. An individually designed plan is just that - individually designed. the Corbel amendment is for the Corbel plan. I think you owe your client a duty to draft an amendment for the plan.

[sloble@crowleyfleck.com]

We are a small employer with limited resources. We all have a duty to do the best we can with the resources we have to be sure. The Corbel form is purportedly not just for the Corbel plan: https://www.relius.net/products/401Amendment.aspx. Of course it would be reviewed and perhaps tailored to our situaion If you have other (helpful) comments please feel free to share. Thanks.

[Below Ground]

Looking at the text of a Good Faith Amendment we get for plans using a specific document service, I noted that it appears that In-Service Distributions are no longer permitted to a participant who has reached Normal Retirement under the Plan. Am I reading this right? Sorry that this question is not directly related to the original post, but it does fall under the topic.

[Trekker]

Replying to BelowGround's query -- I'm looking at a current law versus PPA chart from the Groom Law Group. The current law side of the chart quotes what we all have understood about in-service distributions from pension plans, then the PPA side says: "Section 905 of the Act amends ERISA Section 3(2) and adds a new IRC 401(a)(36) permitting, beginning in 2007, pension payments to be made to a participant who (i) attains age 62 and (ii) continues in employment."

Hope this helps.

[Guest zora]

Does anyone have a cite to authority for the proposition that 12/31/06 is a permissible deadline date for adopting an amendment to comply with the final 401(k) regs? What about a non-calendar year plan?

[Bird]

Rev Proc 2005-66 says you have until the last day of the plan year to adopt a discretionary amendment; the due date for filing the tax return for a required amendment...well, it's probably not that simple but I think that's what's relevant here.

The 401(k) regs are effective for plan years beginning after 12/31/05.

I think the reasoning is that you have choices when implementing at least some of the 401(k) rules, so for a calendar year plan the deadline is 12/31/06*.

*edited from 12/31/05; thanks to PIP for noting this in a subsequent post

[Guest Pensions in Paradise]

so for a calendar year plan the deadline is 12/31/05

I believe Bird intended to say 12/31/2006

[Guest ToddyBear]

Has anyone seen a checklist of required/discretionary amendments?

We have a few plans that will need to be amended by the end of '06, and I'd guess someone out there has made some sort of checklist at this point.

[Guest ToddyBear]

It seems like there is quite a bit of interest in this topic (likely because we now have just over two months to amend these plans in some cases).

Anyone...anyone...Bueller?

[mariemonroe]

I realize the IRS has said they are not issuing a good faith amendment for the new regs, but didn't they essentially give us the necessary language in the CODA LRMs found on their website? http://www.irs.gov/pub/irs-tege/coda_lrm0106.pdf