Plan Amendment

[Gary]

I serve a client's retirement plan and I informed the pension attorney in writing that the plan should be amended to incorporate a unit accrual formula of 3.25% per year.

The attorney delivered the client a two page amendment that provides for an amended formula of 3.5% instead of the 3.25% he was instructed to do.

To me it seems reasonable to just provide the client with a replacement page that shows the correct intended formula of 3.25% instead of 3.5% and he can just toss the old page.

FYI It is a one participant plan. He is the owner.

The valuation was performed with the intended 3.25% formula.

Any thoughts?

Thanks.

[Guest Sieve]

IRS does not like, or acknowledge, that there is such a thing as a proper scrivener's error change. Any such change (or page replacement) is considered by the Service to be an amendment to the plan, and therefore must be formalized and be timely executed as it relates to the specific change being implemented.

That being said, I use them (i.e., change pages) if there is sufficient back-up that it was, indeed, an error--such as, in your case, actuarial studies and drafting instructions from the actuary using the formula that the change implements, or when a provison inadvertenly changed from one that had been consistently used in prior iterations of the plan--and I keep a paper trail. I have never been called on the carpet by the IRS for correcting a scrivener's error--but, then again, I don't make many and the IRS has never audited a plan with one. Can't say whether I'd win the argument if push came to shove. To make matters worse (or better, depending on your point of view), I often make such scrivener's error changes through a formalized amendment, mentioning that it is simply correcting a drafting error--an attempt to prevent later being accused of making the untimely "amendment" surreptitiously in order to prevent detection.

I have, a few times, corrected scrivener's errors in plan language during the favorable determination letter process, simply informing the IRS to reference a proposed amendment (which I provide voluntarily) in the FDL eventually issued. In those cases, I do tell the IRS that the changes simply correct drafting errors, and the IRS has never objected to that approach--even when I've changed actuarial assumptions which were drafted erroneously. Here is a sample of language I've used in such an amendment presented to, and permitted by, the IRS: WHEREAS, the Company wishes to amend the Plan to correct inadvertent errors which occurred when the Plan was most recently amended and restated . . .