Timing of discretionary amendments

[Guest DIY]

According to Rev Proc 2005-66, an employer is considered to have timely adopted a discretionary plan amendment if the amendment is adopted by the end of the plan year in which it is effective. However, for minimum funding, Code section 412©(8) permits a retroactive amendment up to 2-1/2 months after the end of the plan year. Has the IRS indicated whether an amendment made during the Code section 412©(8) period will be considered "timely adopted" for purposes of Rev Proc 2005-66?

[Mike Preston]

I don't think they need to. If the amendment is something that is required for qualification purposes, I don't think 412©(8) saves you. On the other hand, if the application of 412©(8) is solely with respect to minimum funding, which is what I think we are stuck with, I don't see the Rev. Proc. undoing what is clearly in the code.

[Guest DIY]

The amendment in question is a discretionary amendment under Rev Proc 2005-66, not an amendment with respect to a "disqualifying provision." My concern is that the plan will lose the advantage of the remedial amendment cycle because the amendment was not timely adopted by the end of the 2005 plan year.

There doesn't seem to be the same tension between 412©(8) and required amendments, because amendments with respect to disqualifying provisions can be adopted up until the due date for the employer's tax return.

[david rigby]

I second Mike's comments. It seems unlikely that any regulatory pronouncement can override the statute, and unlikely that the IRS would try to do so. Nor does 412(c )(8) seem to impact anything outside of 412.

[Mike Preston]

It very well might be a hole in the Rev. Proc's logic, though. Seems like a great question for the IRS at some point. Of course, we aren't likely to get clarification before this year's witching hour (3/15/06), but I doubt that even if it is a hole in the logic that the Rev. Proc would then stand, unmodified. Once the IRS acknowledged this theoretical hole, they would patch it such that a 412(c )(8) amendment doesn't cause a plan that would otherwise have a remedial amendment period to lose that period.

Is that merely wishful thinking?

I know there has been a "sea change" at the IRS, but if they were to go this far, I would be incredulous.