Deadline for swithcing to current year testing

[JButtrick]

I am just now looking at the 401(k) testing for a plan with a 12/31/05 year end. The document says to use prior year testing and the test is failing, however it would pass on a current year basis. I haven't been able to locate anything definitive on the deadline for amending the plan to current year testing.

One source says the plan MAY have 12 months which is the correction period for 401(k) test failures and the amendment is a correction method.

Notice 2005-95 makes a distinction between amendments necessary to meet qualification requirements and discretionary amendments. It is not clear to me on which side of the fence this amendment would fall, since there are other ways to correct the test failure (refunds), I'm not sure it would fall under the "required for qualification" heading.

[Leopurrd]

I don't think the IRS has issued anything definitive on the issue, but revproc 2005-66 states the requirements for a discretionary amendment (before last day of plan year). ASPPA issued an ASAP on this not too long ago which stated that many at the IRS feel that a change in testing method qualifies as a discretionary amendment.

Sorry this isn't anything absolute, but I'm hoping it will help a bit.

Vicki

[Guest HiKidsImASrPensionAdmin]

We had a plan selected for audit in 2004 that was amended after the plan year to switch the testing method (can't remember which way it was going). The auditor said that the amendment was too late, it had to be done before the end of the plan year because the plan was not being operated according to its document. We tried to argue it, saying we had 12 months, but ended up losing.

[Nate X]

Here's a link to a recent article that should help in answering your question:

http://www.asppa.org/nl/march/06-07.pdf