Amend from current year testing to prior year

[Richard Anderson]

Plan has been currect year testing from 2005 - 2009.

Would like to amend to prior year testing for ADP and ACP.

Can the 2010 testing be amended now, or would that have to have been done by 12/31/09?

Thanks.

[John Feldt ERPA CPC QPA]

The amendment must be executed by the end of the plan year for which the amendment applies, as long as it does not create a cutback of benefits that might have been earned prior to the amendment.

[Richard Anderson]

So is that a yes or a no?

I thought that several years ago the IRS was saying that it could be a cut back of benefits because amending the testing method after the beginning of the plan year could change who gets and the amount of any QNECS allocated, if testing failed.

Are they still taking that position, or are they allowing testing amendments to be done by the end of the year of the change?

[Bird]

It's a maybe. From a document standpoint, it may be done by the end of this year. From a cutback of benefits standpoint, it depends. If a QNEC is hardcoded into the document, i.e. the plan says QNECs must be made if the ADP test fails (unlikely to have that restrictive language), and the change results in a reduction of a QNEC that would otherwise be paid, then it's definitely a prohibited cutback. If the change just results in a lesser refund (or greater)...I don't think they've provided that detailed of an answer. I don't think of a refund as a protected benefit and I think the IRS was more concerned about the first scenario (hardcoded QNEC) in more of a theoretical sense; maybe others know the 411(d)(6) rules better than I do and will have a more definitive answer.