Discretionary Amendments

[Guest lvegas]

401(k) plan wants to provide additional flexibility to participants with respect to distribution options which would require a plan amendment (for instance, permitting in-service distributions). Plan permits such flexibility with respect to a participant early in the plan year, but doesn't actually formally amend until later in the same plan year to permit (with a retroactive effective date of Jan 1).

Is this a case where plan should submit the amendment to VCP under EPCRS to correct an operational defect? Or, can this be classified as a discretionary plan amendment that is considered timely adopted b/c adopted by the end of the plan year in which it is effective (under Rev. Proc. 2005-66, 5.05(3))? How strong an argument is there for the latter?