DB plan with Normal Form of J&100

[John Feldt ERPA CPC QPA]

We came a cross a GUST prototype DB plan (small plan, 5 people) where the normal form is a Joint and 100% survivor annuity (life only if not married).

In order to do that, the document provider did not complete the Normal Form section of the adoption agreement, since Joint and Survivor was not an option there, but they wrote an extra appendix and added it to the end of the adoption agreement to define the normal form as Joint and 100%.

I think this puts the plan in the 5-year cycle. Their EIN ends in 2. They are considering plan termination.

Should they restate and submit to VCP since they are a late restater, or are they considered a 'prior adopter' and still eligible for the 6-year restatement cycle?

We thought about amending the normal form to Life only and add a fully subsidized J&100, but the other optional forms are affected too. What do you recommend?

[Kevin C]

Have you looked through Section 19 of Rev. Proc. 2007-44? If the change in normal form is the only change they made to the adoption agreement, they might still fall under the 6 year cycle for the current cycle. Section 19.03 addresses temporary eligibility for the 6 year cycle.

Did they sign a form 8905? An intended adopter also gets the 6 year cycle.

[John Feldt ERPA CPC QPA]

No, they did not have a signed 8905.

Unfortunately, it looks like the JS100 was in place at the time they restated for GUST - it was not an amendment occurring after, so I don't think section 19.03 applies. Or do you think it is vague enough that perhaps it could be applicable?

An employer who makes certain amendments to its M&P plan is entitled to remain in the six-year remedial amendment cycle only for the current remedial amendment cycle. This temporary eligibility for the six-year cycle applies if the employer amends an approved M&P plan, including its adoption agreement, to incorporate a type of plan not allowed in the M&P program.

[Kevin C]

Sorry, I should have pointed you to section 19.02.

.02 Eligibility for Six-Year Cycle on Continuing Basis

Except as otherwise provided in section 19.03 and 19.04, an employer who modifies a plan in such a way that the plan, as adopted by the employer, would not be considered an M&P plan or a VS plan, will nevertheless be allowed to remain within the six-year remedial amendment cycle due to the nature of the modifications, as described in section 24.02 of Rev. Proc. 2005-16. Thus, plan amendments (other than those described in sections 19.03 and 19.04 below) that are adopted timely and in good faith with the intent of maintaining the qualified status of the plan by employers sponsoring M&P and VS plans will be disregarded for purposes of determining an employer's remedial amendment cycle. In this case, the employer will remain eligible for the six-year remedial amendment cycle. Thus, the plan will continue to be treated as an M&P or VS plan for purposes of this revenue procedure and therefore eligible for the six-year remedial amendment cycle on a continuing basis as provided in section 24.02 of Rev. Proc. 2005-16.

[John Feldt ERPA CPC QPA]

Okay, I think that may work. Thanks!