Is a plan amendment to change a plan year automatically negated due to

[Guest Compliance Rep]

Is a plan amendment to change a plan year automatically negated due to the plan sponsors failure to sign the amendment although the plan was operated under the provisions of that amendment?

[Guest Karen Geiger]

Is there anything in the plan sponsor's board of directors meeting minutes that would established that the amendment was approved?

This would be one way of establishing that the amendment was approved, even though it was not signed.

[Dave Baker]

What kind of employer? Sole proprietor?

[pjkoehler]

The plan's definition of "plan year" is frequently incorporated by reference in the definition of other terms, e.g. "eligibility computation period," "vesting computation period," and "limitation year." These terms are directly related to the operation of the plan. If the plan is maintained by a corporation, a resolution of the board of directors is probably not sufficient to amend the plan. You'll have to look as the specific procedural requirements for amending the plan set forth in the plan document. But most plans provide that the plan is amended in the same way that it was established, by an instrument signed by the appropriate officer.

Typically, a board resolution merely authorizes a specified officer or his/her delegate to execute a form of an amendment that the directors reviewed and approved. By analogy, if the board approves the execution of a contract, but the contract is never executed by an officer of the company, is there a contract? Probably, not. You can argue that such approval has the legal effect of amending the plan, but it's a stretch because logically that means that the orginal board resolution approving the adoption of the plan in the first place was sufficient to establish the plan, even if the plan document was never actually executed. In my experience that sort of plan establishment argument wont pass the "smile test."

But even if the board resolution constitutes a plan amendment, you still have the problem of having a plan document the terms of which are not consistent with the operation of the plan. A basic qualification violation. You also probably didn't meet the SPD modification disclosure rules, which is an ERISA violation.

What you might consider is having the plan amendment currently executed with a retroactive effective date. Have the board approve another resolution ratifying this action and take the position that such a retroactive amendment is not a remedial amendment or other amendment to effect legal compliance, so it's not governed by the limitation on the remedial amendment period. You should probably go in under Walk-in CAP under such an approach. Alternatively, you can look at the effect of undoing the plan year change for prior plan years and make the change currently effective, as a self-correction, since this wont involve a retroactive amendment.