If your company sponsors a retirement plan that is qualified under Section 401(a) or 403(a) of the Internal Revenue Code (such as a 401(k) plan, a profit sharing plan, or a defined benefit pension plan), your plan must periodically be amended for changes in the tax laws and/or the regulations governing such plans. Those changes include the final regulations under Code Section 415 (regarding the limit on annual additions to defined contribution plans and the limit on annual benefits payable under defined benefit plans). The final 415 regulations are effective for “limitation years” beginning on or after July 1, 2007. Because most (but not all) plans have the same limitation year and plan year, the final 415 regulations are generally effective for plan years beginning on or after July 1, 2007. This means that for calendar year plans, the regulations were first effective for the 2008 plan year.
Virtually all plans must adopt “interim” amendments to comply with the 415 final regulations. The due date for such amendments is the later of (i) the last day of the plan year in which the regulations became effective, or (ii) the due date (with extensions) of the plan sponsor’s tax return for the tax year which includes the effective date of the regulations. Therefore, calendar year plans maintained by plan sponsors whose tax year also ends on December 31 must be amended to comply with the final 415 regulations by the later of December 31, 2008 or the due date of the plan sponsor’s 2008 tax return. If the sponsor does not file an extension for its 2008 corporate tax return, the due date for the return (and the amendment) is March 15, 2009. If the sponsor timely files an extension with respect to its 2008 tax return, the due date of the return (and the 415 amendment) is extended to September 15, 2009. Plans maintained by more than one employer, as well as plans sponsored by tax-exempt and governmental employers, may have additional time (calendar year plans generally have until October of 2009) to adopt 415 amendments.
If your company maintains an individually designed plan, and your plan was recently restated and submitted as part of the Cycle C determination letter filings, your restated plan was required to include provisions to address the final 415 regulations. In addition, if you maintain a prototype or other IRS pre-approved plan, the sponsor of that pre-approved plan may have amended the plan on your behalf or provided a 415 amendment for you to adopt. However, if you restated your individually designed plan as part of Cycles A or B, or if you have yet to submit your individually designed plan under Cycles D or E, you may need to adopt a separate amendment to comply with the final 415 regulations.
Therefore, if you have not yet amended your qualified plan to comply with the final regulations under Section 415, you may need to take some action (to either amend your plan or extend your corporate tax return) by March 15, 2009
. Please note that, if your plan’s limitation year is not the same as the plan year, or if your plan year (or your company’s tax year) are not the calendar year, the due date for adopting an “interim” amendment to comply with the final 415 regulations may have already passed. In addition, if your 415 amendment also changes your plan’s definition of compensation (for purposes of allocating employer contributions), and the amendment is adopted late in the plan year (after participants have satisfied all conditions for entitlement to employer contributions for the year) , the amendment may result in an impermissible “cut-back” in accrued benefits. Therefore, even if your final deadline for adopting a 415 amendment is not until later this year, there may be reasons to adopt the amendment sooner rather than later. The amendment must also be carefully drafted to make sure that it does not constitute a cut-back in accrued benefits for the 2008 plan year.
If you have any questions about your plan’s compliance with the final regulations under Code Section 415, please contact one of the following Employee Benefits attorneys at Spencer Fane Britt & Browne LLP:
Lawrence Jenab firstname.lastname@example.org (913) 327-5125