changing valuation dates

[k man]

It is a long story but in order to comply with Rev. Proc. 90-49 which enables employer to take out non-deductable contributions from the plan, i need to change the valuation date from the 1st day of the plan year to the last day of the plan year. is there a procedure for doing this?

[Alonzo]

This does not smell quite right. Does the change in valuation date create the nondeductible contribution, or increase it somehow?

------------------

[k man]

No. The contribution was made an error and is not deductable. As such, the employer wants to take it out. Rev. Proc. 90-49 provides a procedure for doing this mut it must be done the later of 2 1/2 months after the close of the Plan Year or 6 months after the valuation date. well in this case the val date is the first day of the Plan year so both deadlines have passed. So what should my client do?

[Guest Jim Hunzelman]

The IRS considers the valuation date to be part of the funding method. Rev. Proc. 95-51 (as modified by Rev. Proc. 98-10) lists a number of changes to the funding method that can be made without IRS approval (assuming you meet the requirements outlined in the Rev. Proc.) Approval 13 is a change in the valuation date to the first day of the plan year. No other changes in the valuation date are mentioned.

Section 1 of the Rev. Proc. says that "approval for changes not provided by this revenue procedure may be requested from the Internal Revenue Service." It appears that the change you want to make is not one of the "automatic" approvals and would require IRS approval. As I recall these requests are handled by the National Office.

I wish I had a better answer, but it looks like you'll have to go the National Office.

[Guest Mr. X]

Jim is right in that a change in the valuation date to the end of the plan year is not an automatic approval. The procedure for requesting a change in funding method is found in Rev. Proc. 78-37. However, this is not going to help you for two reasons:1) You have to explain why you are requesting the change, and your reason will not fly; and 2) You are attempting to buy 3 1/2 months of time, at most, and this process will take longer than that.

I am not sure of the magnitude of the nondeductible contribution, but could it fall under the de minimus rules of Rev. Proc. 90-49? I suspect, however, that since you referenced that site in your original post, it would not.

[Edited by Mr. X on 07-07-2000 at 04:10 PM]

[david rigby]

I would look for some other mechanism. Could you change the funding interest rate or mortality table in a small way that might help you? But don't be greedy in this regard.