Amendment with No Resolution

[Dougsbpc]

We recently took over a 401(k) plan and generally received excellent information. However, there was one amendment executed a few years ago that did not have a corresponding Corporate Resolution.

Is the amendment valid?

Thanks

[ETA Consulting LLC]

We recently took over a 401(k) plan and generally received excellent information. However, there was one amendment executed a few years ago that did not have a corresponding Corporate Resolution.

Is the amendment valid?

Thanks

Well it would be invalidated on that merit alone. The resolutions are typically created to show that the decision to amend was made by the appropriate authority. A cook at Burger King can draft a plan amendment and execute it, but it would not be binding since the appropriate decision authority did not make the decision. From a process perspective, it should be discovered quickly as the plan's operation will either conform for fail to conform. If it conforms, then that would normally imply that the appropriate decision authority authorized the change. For instance, changing plan eligibility from one year to immediate where employees are given enrollment kits on their first day of employment. That would be clear intent when the company operates the plan pursuant to the new amendment. If they don't, then they can argue the amendment was not valid as it wasn't approved by the appropriate authority.

So, it depends.

Good Luck!

[rcline46]

If the amendment was signed by an appropriate officer, say the president or any other officer who can sign contracts for the organizaion, then I would accept it. After all, a plan is a contract.

In recent years, the only time I have seen a resolution being required by the IRS is for plan terminations. Have not been asked for one on 5307s, VCP submissions or anything else.

[QDROphile]

This is a matter of plan terms and corporate governance, and is very fact-dependant. You cannot presume invalidity. If you want a relatively certain answer you will probably have to get an evaluation by a competent lawyer.

[Dougsbpc]

Thanks for the replies.

It is interesting, with all the IRS plan audits we have had over the past 20 years, we have never been asked to provide corporate resolutions and have never had a problem.

[MoJo]

We recently took over a 401(k) plan and generally received excellent information. However, there was one amendment executed a few years ago that did not have a corresponding Corporate Resolution.

Is the amendment valid?

Thanks

The answer is really dependant on the corporation and it's normal mode of operation. In many cases, I have seen "gerneral" board resolutions that grant blanket authority to a corporate officer to execute such amendments as may be neccessary or conveninet. Other times, I've seen board resolutions that annually "ratify" actions taken by the officers (either generally, or specifically with respect to the plan). Even other times, I've seen no board resolutions, because the officer (somehow) actually does have the authority to perform such functions. One resolution per Amendment is neither a legal requirement, nor necessarily all that common (in any arena but plans - solely do to the fact that an outside service proviedr usually preps them (including a resolution) outside of the normal corporate board process).

Ask: Was this amendment authorized, and if so, how?

[mbozek]

There is no IRS requirement that plan amendments need to be ratified by board action. Most corp delagate authority to adopt plan amendments to a corp offricer e.g., president, CEO, HR director, etc because the board does not want to be bothered with such mundane matters. Even if board approval is requried most corp allow corp officer to sign subject to subsequent board approval at any time. At most its a ministerial matter of corp governance. Also some amendments are pro forma because no discretion is permitted. Document is signed and in put in a drawer.