Deduction of 150% UCL, amendment in effect 2 yrs

[Guest sueczer]

I do not see where this question has been raised before. Section 404(a)(1)(D)(ii) states UCL shall not include the liability attributable to HCE beenfit increases resulting from a plan amendment which is made or becomes effective, whichever is later, within the last two years. Specifically, if a plan amendment increasing liabilities was signed 3/28/06 effective for the 2005 calendar year, can the maximum deduction of the UCL be used in the 2008 calendar plan year? Or does the signing of the amendment in 2006 force us to wait until the 2009 calendar plan year?

[tymesup]

I don't think you can reflect the amendment for a 1/1/08 valuation.

[Mike Preston]

Or even a 12/31/08 valuation.

[Andy the Actuary]

And allow me to introduce a related question that I do not believe has ever been answered:

An amendment increasing benefits for HCEs is effective 1/1/2006 for a calendar year plan. Is the first plan year it can be recognized for the UCL maximum the plan year beginning 1/1/2008 or the plan year beginning 1/1/2009. I've asked this at three EA meetings. Speaker #1 always answers, "Well, of course, 1/1/2008" and then Speaker #2 interjects "I'm not so sure."

[Mike Preston]

I think you are off by a year, yes? Anything signed in 2006, whether 1/1/2006 or 12/31/2006 is an amendment that is made within two years immediately before the 2008 year and therefore can not be taken into account for 2008, but can for 2009. It is the pesky amendment adopted 3/15/2007, effective 1/1/2006, which can't be taken into account until 1/1/2010 that bothers some people.

I'm not saying I like the way the IRS has interpreted the statute, but I find no reason to bounce their interpretation as being unreasonable.