Retro amendment for early inclusion

[Guest Serena]

If you retroactively amend a plan to include employees who entered the plan to early which is permitted under the self correction program, do you need to file with the IRS if the plan is on a pre-approved prototype?

It seems as if you have already done self correction via the amendment, why submit to IRS?

[K2retire]

You file with the IRS because Rev. Proc. 2008-50 says you do.

[Kevin C]

Not exactly.

Rev. Proc. 2008-50, Section 6.05 Submission of a determination letter application. (1) In general. This section 6.05 sets forth the situations in which a determination letter application is required to be submitted as part of the correction of a Qualification Failure if the correction includes a plan amendment. If a determination letter is required under this section 6.05, then, unless otherwise specified in this revenue procedure, the provisions of Rev. Proc. 2007-44 will apply. Thus, for example, in the case of an ongoing individually designed plan, a determination letter application will be reviewed with respect to all items of the Cumulative List (as defined in Rev. Proc. 2007-44) that would apply to the remedial amendment cycle during which the determination letter is filed. Notwithstanding any other part of this section 6.05, a determination letter is not required if the correction by plan amendment is achieved through the adoption of an amendment that is designated as a model amendment by the Service or the adoption of a prototype or volume submitter plan with an opinion or advisory letter as provided in Rev. Proc. 2008-6, 2008-1 I.R.B. 192, on which the Plan Sponsor has reliance.

I think it is clear that a correction via restatement using a pre-approved document doesn't require a determination letter submission. It isn't clear whether an amendment to a pre-approved plan is treated the same. Although, I have heard an ERISA attorney claim that with the new amendment procedure for pre-approved plans, every amendment is a restatement.

[QDROphile]

That does not mean that the plan is not required to file under VCP with respect to the retroactive amendment. The requirement for application for a determination letter is a separate requirement that applies to some, but not all VCP filings.

[Tom Poje]

but this is probably an SCP filing, not a VCP

[Guest Sieve]

As per Tom, above, early inclusion of an otherwise eligible employee is, in fact, a correction that can be made by plan amendment under EPCRS' self-correction procedures. (See EPCRS, Section 4.05(2) & Appendix B, 2.07(3).) So, no VCP application is required--at least if the self-correction is within the time period for correction of a significant defect.

Moreover, if you retroactively amend the Plan for early inclusion by appropriately adopting a prototype document (with proper effective dates that actually make the correction back to when it should be effective without impacting other plan provision effective dates), then I would agree with Kevin that a favorable determination letter application is not necessary. (In some case of SCP by amendment--such as for an individually-designed plan--a VCP application may not be required, but an FDL application still is required at some point as per EPCRS, Section 6.05.)

[KJohnson]

I agree with Sieve. I did however, flag one in a determination letter filing where a sponsor had some minor changes to the VS plan unrelated to the retroactive amendment. Here is what I put in the cover...

The amendment listed in Section 3(d)(ii) of the Form 5307 is a retroactive amendment regarding eligibility to reflect the Plan’s operation and corrected through SCP. This amendment was subsequently incorporated in the adoption of a pre-approved volume submitter plan and a determination letter for this corrective amendment would not appear to be required under §6.05(1) of Rev. Proc. 2008-50[1]. Since the Plan sponsor is, however, seeking a determination letter regarding the Plan as restated (due to unrelated modifications to the volume submitter document) then pursuant to §6.05(2)(b) of that same Rev. Proc. we are identifying this amendment as a corrective amendment and this will affirm that neither the Plan nor the Plan Sponsor has been a party to an abusive tax avoidance transaction (as defined in section §4.13(2) of Rev. Proc. 2008-50).

[1] 6.05(1) states: Notwithstanding any other part of this section 6.05, a determination letter is not required if the correction by plan amendment is achieved through the adoption of an amendment that is designated as a model amendment by the Service or the adoption of a prototype or volume submitter plan with an opinion or advisory letter as provided in Rev. Proc. 2008-6, 2008-1 I.R.B. 192, on which the Plan Sponsor has reliance.