Failed 401(a)(4) Discrimination Test? Retroactive Corrective Contribution Plan Amendment to the Rescue!

Tip of the Day

By Stephanie Reagan

sreagan@sunlin.biz

Have you failed 401(a)(4) discrimination test no matter what you have tried? A Retroactive Corrective Contribution Plan Amendment can save the day.

Regulation Section 1.401(a)(4)-11(g) allows one to satisfy the coverage, or the nondiscrimination requirements, by making a retroactive amendment to the plan to correct the failure. A corrective amendment may retroactively increase accruals or allocations for employees who benefited under the plan during the plan year being corrected, or it may grant accruals or allocations to individuals who did not benefit under the plan during the plan year being corrected. In addition, a corrective amendment may make a benefit, right, or feature available to employees to whom it was previously not available.

Note that a corrective amendment must be adopted and implemented on or before the 15th day of the 10th month after the close of the plan year the amendment was meant to correct.

 

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