I have a client (C Corp) who wants to amend their plan for a last day requirement for PYE 12/31/ 2006. The match is discretionary, they fund the contribution after the end of the plan year (before 4/15), and so far in 2006, no one has terminated. Here's the kicker: they do not have an hours requirement.

Currently, the plan document has no hours of service requirement or last day.

Can we put in place an amendment for PYE 2006? Or, does the amendment have to be effective 1/1/2007? I was told it cannot be done for 2006 because it's taking away a benefit, and if that is the case, are there any exceptions?

Thanks!!

LDY for match is unusual I believe. The IRS position is that you can't amend that formula now, I believe. The way around is to use a contribution that has a LDY already (QMACs) or create a new one with a LDY. You amend the existing match to read 0% for 2006 and you add a new "Auxiliary Match" or "Supplemental Match" (or better yet, call it a PS cont.) with entirely new provisions and a LDY. It is not bulletproof, but you can do it if you carry it off "smoothly."

Thank you very much for your quick response! This helped quite a bit.

We did that amendment for one of our aggressive clients. They ended up suing us for the IRS costs associated with their plan disqualification. We are still in litigation.

What happened? Maybe you weren't "smooth" enough?