Terminated Plan without Interim Amendments

Hi -- we have a company that terminated its pre-approved 401(k) plan very recently. The plan timely adopted the Cycle 3 restatement, but did not adopt the interim amendments prior to the termination. The resolutions do reserve the authority of officers to execute any amendments necessary to effectuate the termination, and the assets have not been distributed yet.

Section 7 of Rev. Proc. 2016-37 provides that:

Notwithstanding Sections 5 and 6 of this revenue procedure, the termination of a plan ends the plan's remedial amendment period and, thus, generally will shorten the remedial amendment period for the plan. Accordingly, any retroactive remedial plan amendments or other required plan amendments for a terminating plan (that is, plan amendments required to be adopted to reflect qualification requirements that apply as of the date of termination) must be adopted in connection with the plan termination regardless of whether such requirements are included on a Required Amendments List.

It doesn't say that the amendments absolutely have to be adopted prior to the termination, just in connection with it. So I am wondering if we can make a reasonable argument that the interim amendments can still be adopted in connection with the termination if they go ahead and adopt them now? The resolutions adopting the amendments would of course reference the provisions from the prior resolutions and the Rev. Proc. Or do you all think we should not risk that and just do VCP? There are some timing pressures that make VCP not desirable.

Thanks for your thoughts!!

Consider whether, even if not all tax-qualifying amendments were done by the date of the resolution that discontinued the plan, it might be good enough that the amendments are done before the plan terminates by paying or delivering its final distributions.

Understand that the Treasury department’s remedial-amendment concept might provide no relief concerning ERISA §§ 402-404.

On a few of many related points:

Has the plan’s administrator yet communicated to participants, beneficiaries, and alternate payees that the plan is ended and will pay a final distribution?

If that communication has happened, would the not-yet-done amendment affect anything that was communicated, or affect any choice available to a distributee?

If so, the plan’s administrator might evaluate whether a further communication is needed or appropriate.

Also, if any to-be-amended provision was not explained in a previous summary plan description or summary of material modifications, the plan’s administrator might evaluate whether it must or should write and furnish a revised SPD or SMM.

My thoughts are adopt the conforming interim amendments now and be done with it, assuming you are talking about interim amendment deadlines that haven't already passed like SECURE and CARES here not say Hardship Interim amendments.

I agree with Lou S. We have often had clients adopt interim amendments after the plans were terminated (if they were still adopted before the amendment deadline). In most cases, it was because we didn't yet have all the guidance we needed or wanted to adequately draft the interim amendment at the time of termination. I'm talking within the same year as the termination. (We would not terminate a plan and then adopt an interim amendment two years later.) We always make sure to warn the plan sponsor that they must adopt the amendment and that it will be after the termination date so that they understand the importance of signing the amendment when we send it later. 

If you submit a termination application to IRS, they may require the plan sponsor to adopt an amendment post-termination to bring it up to date with current law provisions that they don't think have been included so clearly a plan can be amended after the termination date.

I do not think a VCP application is necessary.

I agree with Peter.  It was always my understanding that the plan was not "terminated" until all assets were distributed.

On 9/30/2022 at 2:58 AM, EmpbAF said:

ection 7 of Rev. Proc. 2016-37 provides that:

Notwithstanding Sections 5 and 6 of this revenue procedure, the termination of a plan ends the plan's remedial amendment period and, thus, generally will shorten the remedial amendment period for the plan. Accordingly, any retroactive remedial plan amendments or other required plan amendments for a terminating plan (that is, plan amendments required to be adopted to reflect qualification requirements that apply as of the date of termination) must be adopted in connection with the plan termination regardless of whether such requirements are included on a Required Amendments List.

It doesn't say that the amendments absolutely have to be adopted prior to the termination, just in connection with it. So I am wondering if we can make a reasonable argument that the interim amendments can still be adopted in connection with the termination if they go ahead and adopt them now?

IRS could have been clearer, but I've always thought that in this sentence they are just saying that you can't NOT amend for law changes that are in effect at the date of termination and use as an excuse that those changes are not yet on the LRM.

I appreciate the comments and thoughts very much. Thank you everyone!