plan design

[Gary]

if a plan fails 401(l) - does it have to be amended in order to remain qualified?

[Lorraine Dorsa]

Plans are not required to comply with 401(l) for qualification. 401(l) is called permitted disparity because it works just that way--you are permitted to ignore the disparity in benefits for non-discrimination purposes.

In most cases, plans which use 401(l) permitted disparity do so because they want to have a benefit which will comply with the safe harbors of 401(a)(4) and therefore will not require non-discrimination testing using the general rule.

If a plan provides integrated style benefits and does not comply with 401(l), either intentionally or unintentionally, it must be tested for non-discrimination re the amount of benefits under the general test of 401(a)(4).