Effective date of late amendments (past remedial amendment period)

[Guest KennyH]

I have a client with a frozen 401(k) plan that was never restated for GUST or EGTRRA. I am attempting to put this client on our EGTRRA VS document and am unsure about the appropriate effective date of certain provisions.

History: Plan became effective 7/1/1995 using a prototype document of the vendor, but based on certain language it appears the prototype document was never submitted for an opinion letter (and never intended to submit). The plan only has CODA contributions and QNECs to satsify non-discrim testing. The only amendment to this plan after it became effective was to cease all contributions to the plan effective 12/31/1997. (This division was determined to be non-profit and was moved into the company's 403(b)). The plan itself has never submitted for a d-letter.

The plan never had more than maybe 2 dozen participants and has about 8 now. I can only assume the plan has been operated in accordance with the existing plan document and am unsure about how any legislative changes have been treated (e.g. 180-day QJSA election period). It does not appear that much of the language, if any, would cause 411(d)(6) issues and I expect it is unlikely that there have been any operatioanl failures (other than lack of amendments - but do not know enough about actual administration to make a detemermination) mainly because it has been frozen. However, I am wondering about the effective date of the restated document and the various legislatively required provisions. Is it better/appropriate to amend the plan with retroactive effective dates for GUST and EGTRRA provisions (based on either the required dates or actual plan adminstration) or would it be more appropriate to have an effective date of 1/1/2010 (or some other more recent date) and focus on keeping the plan in compliance going foward?

[Kevin C]

I would suggest a VCP nonamender filing. The filing fee is only $375 for late amendments to comply with optional and required law changes (Rev. Proc 2008-50, Section 12.03). If they get caught in audit, the sanction will be many times that. I recently helped a one-man plan go through audit cap as a nonamender. The owner had been doing the plan work himself, until he got audited. He got a $6,500 sanction for the late amendments.

[Guest KennyH]

I would suggest a VCP nonamender filing. The filing fee is only $375 for late amendments to comply with optional and required law changes (Rev. Proc 2008-50, Section 12.03). If they get caught in audit, the sanction will be many times that. I recently helped a one-man plan go through audit cap as a nonamender. The owner had been doing the plan work himself, until he got audited. He got a $6,500 sanction for the late amendments.

We intend to go through VCP, but that doesn't answer the question of when certain plan provisions should be effective (unless I am missing something in EPCRS).

[Kevin C]

I don't see how you could correct the nonamender failures unless the amendments are effective retroactive to when they should have been effective if they were done timely.