Resolution vs. Amendment

[Guest nmyers]

I've worked for several TPA firms and over the years and I've learned there are things that are required by law, and things that are not required but are good practices of each employer.

1st Scenario

If the plan states that the Employer has the right to amend the plan from time to time, and then decides to freeze the plan, would a resolution to freeze the plan be enough to freeze the plan? Should the TPA then draft a corresponding tack-on freeze amendment? Or is it safe to include the freeze date within the restated document, simultaneously?

2nd Scenario

If the Employer chose to freeze the plan and signed a resolution as of 2009, but did not amend and restate the plan until 2010, which includes the freeze date of 2009 per the resolution, was the plan freeze done timely? Should there have been a tack-on amendment or restated document for the 2009 year to cover the freeze. Is the resolution enough?

[Guest Sieve]

I assume there are no 204(h) issues--i.e., this is not a DB or MPPP requiring a notice in advance of reducing or eliminating future accruals. If there is a required 204(h) notice that should have been given and was not, then your resolution vs. amendment question is moot.

I would be very careful, however, and make sure that there is a timely amendment to the plan in addition to a corporate resolution (although, in some circumstances, a resolution might be sufficient).

[Guest nmyers]

I assume there are no 204(h) issues--i.e., this is not a DB or MPPP requiring a notice in advance of reducing or eliminating future accruals. If there is a required 204(h) notice that should have been given and was not, then your resolution vs. amendment question is moot.

I would be very careful, however, and make sure that there is a timely amendment to the plan in addition to a corporate resolution (although, in some circumstances, a resolution might be sufficient).

This indeed was a money purchase plan. We did send out a 204(h) notice stating that the employer would be eliminating future accruals. With that being said, do you believe that a resolution would be sufficient?

[Guest Sieve]

No. Notice must be given before the effective date of an amendment, and I think it's a stretch to say that a resolution is an amendment to the plan. But others may disagree.

[Kevin C]

What does the plan document say about the amendment procedure? The plan language should be helpful in determining if it was a valid amendment.

[Gudgergirl]

I have a MPP Plan in which the employer wanted to reduce the employer contribution. TPA firm prepared a 204(h) notice and board resolution, but no amendment. Regarding Plan amendments, the Plan states: Any amendment to this Plan shall be made pursuant to a resolution adopted by the Board of Directors.

So, has the plan been amended?

[GMK]

Obviously I don't know the details, but in general I would not rely on a resolution alone to amend a plan document. I prefer a resolution that gives all the Whereas's and includes a Therefore that states that the Board approves the attached amendment.

The resolution is formal notice that the Board approves the change, and the amendment specifies what wording is changed in the plan document.

[Locust]

It's sort of a philosophy question - what is an amendment? It's better to have a separate document that is labeled an amendment because that's what people expect to see. No philosophical questions then. But I would say that any writing that is adopted by the Board and that would include a resolution that acts upon the Plan is an amendment to the Plan.

[jpod]

Does the resolution say something like: "The plan is hereby amended to change the contribution formula to % effective ____ __, _____." If so, you have a decent leg to stand on.

Does it say something like" "The plan shall be amended to freeze accruals effective ____ __, ____. The officers of the company are hereby authorized and directed to take such steps as are necessary to implement the freeze of accruals." If so, I think you have a problem.

[Gudgergirl]

Does the resolution say something like: "The plan is hereby amended to change the contribution formula to % effective ____ __, _____." If so, you have a decent leg to stand on.

Does it say something like" "The plan shall be amended to freeze accruals effective ____ __, ____. The officers of the company are hereby authorized and directed to take such steps as are necessary to implement the freeze of accruals." If so, I think you have a problem.

No and no.

It says the employer has decided to reduce the employer contribution as of DATE as follows: BLAH BLAH BLAH

It says nothing about amending the plan or authorizing officers/directors to accomplish this resolution.

[GMK]

Great example, jpod.

It says nothing about amending the plan or authorizing officers/directors to accomplish this resolution.

For general reference, it's good form and sometimes necessary to include a boilerplate or specific authorization statement in any resolution (board, trustee, etc.).

[TPAMan]

As we see it, the resolution provides the intention and authority for the plan to be amended. Since the plan is a written document, until it is amended, nothing changes.

So if a plan sponsor resolves to reduce a MPP contribution to 0%, but no amendment to the plan is ever made, I would be inclined to act on the plan document as written.

Generally, we have the resolution provide the nature and effective date of a change; the amendment provides the new/replacement language for the plan document specifying the Section, etc being changed.

[K2retire]

I am include to agree with TPAman, although I'm sure there are exceptions.

I once had a case of a union MPPP. The union contract changed the benefit, but nobody thought to amend the plan. The corporate attorney who was the plan trustee and the ERISA attorney ultimately decided that the change could not occur until the plan was amended.