Retrocative Plan Amendment

[Guest Thornton]

A small employer was using a bank master plan document and the bank served as trustee. The plan has a 6/30 y/e. In February 1997, the plan sponsor fired the bank and self-trusteed the plan. However, the plan was never restated. I have been retained to provide administrative services and to bring the plan into compliance.

1. Did the bank document continue to be effective? I believe only regional prototypes have an annual filing requirement.

2. If we restate now, should the effective date be current or an earlier date?

3. If there is a "gap period", couldn't we cover it by restating effective back to Feb 1997 since the remedial amendment period will allow this anyway?

4. Any other ideas?

[Guest Ray Williams]

First- when you terminated the bank as trustee you should have amended the Plan to provide for and individual trustee. By not amending you have not been operating the Plan in accordance with the document. This is probably a CAP issue. If you restate the Plan on a Standardized Prototype and ignore the CAP issue, you may never be audited and even if audited the agent may not recognise the problem. If you restate on a Non-Standardized Prototype or on an IDP, you will need to file for a Determination Letter, at which time the agent should recognise the problem and will tell you what action he or she will require. I would recommend that you contact your ERISA attorney immediately.

[Guest Thornton]

He did a corporate resolution at the time he fired the bank as trustee, naming himself as an individual trustee. However, he continued to use the bank's standardized master plan document and operated in compliance with the document. He now wants to restate onto our standardized regional prototype. If I restate as of the current date, is there a gap period issue from February 1997 when he fired the bank to the restatement date? Can I restate back to February 1997? Thanks.

[Guest Ray Williams]

First- any restatement would only relate back to the first day of the current plan year. (The only time you can restate back to an earlier date is during a restatement period when IRS has been required to approve document language with a statutory effective date and has extended that period because it was unable to approve that language in a timely manner.)

Second- if the corporate resolution not only named a new trustee, but also amended the document provision that required the bank to be the trustee, then you have removed the prototype status of the document and made it an IDP. If the amendment was valid, and you have been operating in accordance with the amended document, you have now been operating your plan under the terms of the IDP. If so, then you should need only to restate the document, but with a current year effective date.