Effect of Late Discretionary Amendment

[JJRetirement]

Discretionary plan amendment for defined contribution plan is adopted after the end of the plan year during which is became operational.   Assume it's operational during 2015 (calendar) plan year and adopted July 1, 2016.  Amendment says it's effective 1/1/15.  

What is the effect? Is the amendment entirely void?  

or

Is the amendment deemed effective 1/1/16 (first day of the plan year in which it was adopted), limiting the operational failure to only 2015?  

Or - is there another possibility? 

 

[CuseFan]

Depending on what provisions were amended, you could file for a document failure under VCP and ask IRS to allow the retroactive application, especially if the plan was operated in that fashion. However, if the amendment served to lower benefits or appears to favor HCEs, then the chances of that diminish.

[JJRetirement]

Thanks CuseFan.  I understand the VCP option - that's what should have been done initially, and it can still be fixed.  

But for now, we are just trying to quantify the failure. Did it end as of the first day or the plan year in which the amendment was adopted - or does it continue to this day because the amendment was entirely void?  The operation of the plan was more favorable to participants than the document (prior to amendment).  The amendment attempted to align the plan language with this more favorable operation. 

[CuseFan]

I think the failure ended the beginning of the year adopted - I don't think the amendment is void. Also, and this isn't my area so I'm not positive, but certain types of provisions can fall under self correction via a retro amendment - like loans or hardships, etc. right?