No harm, no foul???

[Ervin Barham]

Employer makes several amendments to plan and restates. The prior plan had an immediate distribution policy, but new plan is completed by checking a 1 year break before distributions. This is obviously a 411(d)(6) protected benefit. Employer failed to catch the change.

No terminated employees during this period. Employer wants change plan back to immediate distributions.

Any thoughts on this method of correction? Is this a CAP issue?

[BeckyMiller]

Not a lawyer, but we have seen 2 approaches in this kind of case. One is to amend the plan retroactively and submit a short form 6406 request for ruling on the amendment. Just explain that it was inadvertent, not authorized, no effective due to the 411(d)(6) prohibition, etc. We have had this work with no questions asked by the IRS.

The other approach, for which we recommend the involvement of an attorney, is to look at the authorization of such change. If it was just an error, argue "scriverner's" error and change it back to what was intended. We have had legal counsel give approval of this on the basis that such change was never requested by the plan sponsor and is not permissible under the law.

In neither case, did we use any of the EPCRS alternatives.

Key to these conclusions was the fact that the change was intentional no one was affected by it.

[Guest njwhite]

In the particular situation described, I agree with the scrivener's error analysis and related correction method. However, the most prudent approach would probably be to file a Walk-in CAP application to secure the IRS' "blessing" on the correction. Note that there is now specific authority for correction by use of a retroactive amendment to conform the plan's terms to it prior and intended operation. See section 4.05(2) of Rev. Proc. 98-22 ("Reformation CAP").

------------------