Retroactive amendment and VCP

[30Rock]

Is VCP available for a 403b plan that wants to retroactively amend the plan for something?

Thanks!

[ETA Consulting LLC]

That gets tricky. Generally, items that are purely document related (e.g. We failed to create a written plan in 2009 when the Regs required us to do so) is not available under VCP. We're told by other practitioners that attempts to submit this type of error under VCP were returned by the IRS (who refused to review). Arguably, this would pertain to the equivalent of a failure to qualify in "Form" in a qualified plan. You could look at a retroactive amendment as an operational defect (failure to qualify in 'Operation') during your submission. "I think" this is where the IRS draws their line on what they will review and what they will return. I am also a fan of 'trial and error'; so I'd do it until some other practitioner blesses us with insight on their experiences with the IRS.

Good Luck!

[Guest GeerTom]

I have always taken this attitude of the IRS to be an effect of the fact that the remedial amendment period only applies to quailified plans under the express terms of 401(b). Since the RAP doesn't apply, IRS can take the position that they do not have authority to allow plan document failures to be corrected, and I believe that position is correct. Literally, I read the 403(b) regulatory scheme to require a compliant plan document before the first day of the year.

However, that analysis only applies to what would be plan documents failures for a qualified plan. As to other failures in the correction of which a plan document amendment might be required, there is no reason to apply the RAP. In such cases, IRS is simply discretionarily declining to enforce all available sanctions, and they can do what they like. (Which, of course, they could do with plan document failures if they didn't get caught up in the implications of 401(b).) So you are on firmer ground if the correction requires an amendment but there is no plan document failure.

In either event, I agree with ERISAToolkit on the practical implications. Fortune favors the bold, a corrective amendment not submitted may never be reviewed by IRS and there is a decent argument that the IRS policy on document failures is wrong and can be argued away when the need arises. In any event, the real-world problem that is really at issue will have been fixed, which is always a good thing.