HEART Act Amendment

[Fielding Mellish]

It has recently come to my attention that some of my Taft-Hartley pension plans were not amended for the HEART Act. I won't go into why as it's not really important right now.

My plans' restatement cycle begins February 1, 2014 and runs through January 31, 2015. I am planning on submitting them for restatements within that time.

I am going to have my non-amended for HEART plans pass amendments at their next quarterly meetings (all of them will be held before the end of 2013). I am then going to submit those amendments to VCP.

My questions:

1) If the amendments are passed by the end of 2013 and I submit to VCP by the end of 2013, will I qualify for the reduced $375 VCP fee (pursuant to Rev. Proc. 2013-12, Sections 6.05(3) and 12.03(2))?

2) Which schedule would I use when submitting to VCP? Appendix C, Schedule 1? Appendix C, Schedule 2? I'm thinking schedule 2 because these plans were not amended within the remedial amendment period. So, I'll just have to fill out the "other" box on the schedule and say that it was for HEART, etc. But, I wanted to see what you all thought.

Thanks.

[Kevin C]

1) Yes.

2) Appendix C Schedule 1. You would use Schedule 2 if a late amendment was adopted after the end of the cycle that included the due date for the amendment. The end of that cycle is the end of your extended remedial amendment period. The $375 fee applies if you can file only using Schedule 1.

[Fielding Mellish]

Thanks for your response, though I'm still a little confused by the remedial amendment period.

I thought the remedial amendment period for the HEART Act was by the end of the first plan year beginning on or after January 1, 2010. If I don't adopt the amendment until 2013, then I'm outside the remedial amendment period. Therefore, I'd need to use schedule 2.

Or is the remedial amendment period the "off-cycle" time period? If so, is there guidance on that?

[Kevin C]

You are confusing "remedial amendment period" with "remedial amendment period" as extended by Rev. Proc. 2007-44. The remedial amendment period ends on the due date for the amendment. If you don't adopt the amendment by then, it is late. The extended remedial amendment period comes from Section 5.03 of Rev. Proc. 2007-44 and is the end of the 5 or 6 year cycle the amendment due date falls in. If you timely adopt the required amendment, you have until the end of the extended remedial amendment period to correct any problems with the previously adopted amendment.

6.05(3)(a) tells you when you qualify for the $375 fee.

(3) Determination Letter application not required or permitted. (a) Failure to adopt timely good faith amendments, interim amendments, or amendments required to implement optional law changes before the expiration of the plan’s remedial amendment period as determined under Rev. Proc. 2007-44. (i) In general. The provisions of this section 6.05(3)(a) are applicable with respect to a failure to adopt timely good faith, interim, or optional law change amendments that is corrected (i.e., corrective amendments are adopted by the employer) prior to the plan’s first on-cycle year following the date by which any such amendment should have been adopted pursuant to section 5.05 of Rev. Proc. 2007-44. If a Plan Sponsor submits a failure under VCP or corrects a failure under Audit CAP to adopt timely good faith amendments, interim amendments, or timely amendments to the plan to implement optional law changes, then a determination letter application is not required and may not be submitted with the VCP submission or as part of the correction of the failure under Audit CAP.

Rev. Proc. 2008-50 had different wording for when you qualifed for the $375 filing fee. The first couple of them I filed, we were able to correct for late amendments all the way back two or three restatement periods for the $375. Then, the IRS changed their interpretation and started saying if you had a late amendment that was not adopted by the end of the cycle in which it was due, you did not qualify for the $375 fee. The updated Rev. Proc. incorporated that restriction. Schedule 1 is for the $375 filing. If you have a late amendment that has to go on Schedule 2, you will have to pay a higher fee.

Clear as mud yet?

[Fielding Mellish]

Actually, that's very helpful.

So, to be timely, the amendment had to have been adopted by the end of the first plan year beginning on or after January 1, 2010 (which was the remedial amendment period for HEART).

Since the amendment was not adopted by then, it is not timely.

However, the plans can still take advantage of the $375 and Schedule 1 because it will have been adopted by February 1, 2014, which is the beginning of the next cycle time for these plans.

Correct?

[Kevin C]

I agree, although I would change your last statement to adopted before February 1, 2014.

Of course, agent reviewing the filing ultimately decides what the filing fee is. My experience under 2008-50 was that determination of the fee was not consistent between agents. (I'm trying to be nice).