Hello:

We have an ESOP that is being reviewed under Cycle B and the IRS is asking for our amendment to the ESOP for the final regulations to 409(p). The IRS indicated that the final regs 409(p) amendment must have been adopted by the plan sponsor on or before December 31, 2006, because the final regulations were effective January 1, 2006.

I recognize that on the 2006 cumulative list (which covers Cycle B submissions) that the final regs to 409(p) are listed on there; however, I disagree that a final regs 409(p) amendment was required to be adopted by the ESOP on or before December 31, 2006.

I have three questions:

1. Is the IRS correct that an amendment required to the ESOP for final regulations 409(p) on or before December 31, 2006 (the ESOP is a calendar year)? (Please note that if the answer is yes, I find this hard to believe since the final regulations were only issued on December 19, 2006).

2. If the amendment was required, is it the same language as is in the model amendment issued by the IRS in 2008?
http://www.irs.gov/retirement/article/0,,id=184380,00.html

3. Does anyone think that the IRS is just mistaken and is confusing the triennial methodology discretionary amendment (which is only required if the plan decides to use the triennial method). http://www.irs.gov/retirement/article/0,,id=173372,00.html

I sincerely appreciate any input.

Elizabeth

1--I agree that the amendment was not required to be adopted by December 31, 2006. Shouldn't the amendment deadline have been the company's tax return filing date?

2--I think the model amendment only deals with transfers to the non-ESOP portion of the plan. The IRS worksheet for reviewing plans (http://www.irs.gov/pub/irs-pdf/f5626.pdf) seems to indicate that the IRS requires plans to provide (i) that no portion of the plan will accrue to disqualified persons during an nonallocation year and (ii) definitions for various terms.

Our ESOP incorporated 409(p) by reference, but now I'm concerned that we should have done more. Was the IRS threatening to put the ESOP in audit cap for not amending for 409(p)?


Laura