plan amendment in 2008

[Guest Sus95]

I have a 1/1/08 funding val and wish to amend the benefit formula to increase benefits (1 person plan) and reflect the increase in my FT and TNC for 2008.

According to 412(d)((2) of the code, which appears to have replaced the old 412©(8) of the code, you can amend the plan after the plan year, but within 2.5 months after the end of the plan year, with an effective date on the valuation date, and incorporate the amendment into the 2008 funding numbers.

If you look at the reg. 1.430(d)(1)-(d) - it gives authority to amend the plan with an effective date during the plan year, but it must have been adoped on or before the val date, in order to consider the admendment in your 2008 funding results.

What was left out, which is what most of us do with our small DB plans, is what to do with an amendment that is adopted prior to the end of the plan year, and effective on the val date. A strict reading of the code and reg indicates that this amendment CANNOT be reflected in the 2008 val.

This is odd. If I am considering an amendment now, it appears that I should actually WAIT until after 12/31/08 and have the client sign the amendment by 3/15/09 in order to be in compliance with 412d2.

Has anyone dealt with this issue yet?

Comments would be appreciated.

Thank you.

[Andy the Actuary]

I can offer that I worked through this Rev. Rule 77-2 situation with a benefits attorney (whom we have dubbed "the walking internal revenue code") and he opined that the intention of the new law was not to create this unreasonable result. That opinion and $3.86 will buy you a Venti Mocca Frappucino.