On December 2, 2005, the IRS released an advance copy of Notice 2005-95 (www.irs.gov/pub/irs-drop/n-05-95.pdf) to clarify the interaction of amendment timing deadlines set forth in Revenue Procedure 2005-66 with deadlines set forth in other
published guidance and to extend certain amendment deadlines. Specifically, Notice 2005-95 provides guidance on the timing of amendments in the following areas:

Notice 2005-95 did not alter the basic amendment requirements of Rev. Proc. 2005-66; it provided transitional relief for certain of the deadlines.

Rev. Proc. 2005-66 provides the general rule that a required amendment must be adopted by the later of (1) the employer’s tax return due date (including extensions) for the year that includes the effective date of the required provision or (2) the
last day of the plan year that includes the effective date of the required provision. A required amendment is an amendment that corrects a disqualifying provision or adds provisions required for compliance with Code Section 401(a). Required amendments
also include correction or addition of provisions integral to disqualifying provisions.

A discretionary amendment is a plan change that implements new or changed rules prior to a required compliance date or adopts optional plan provisions. Under Rev. Proc. 2005-66, the deadline for adopting a discretionary amendment is the last day of the plan year in which the change is implemented.

In general, the deadlines specified in Rev. Proc. 2005-66 apply, except in two situations. First, where a statute or other IRS guidance expressly requires an earlier deadline, that
deadline will apply. For example, Code Section 411(d)(6) generally prohibits retroactive amendments that result in cutbacks. Also, an amendment to convert a 401(k) plan to a safe harbor plan must be adopted before the beginning of the plan year in which the change is effective. The second exception is where a statute or other IRS guidance provides a specific deadline that is different from the Rev. Proc. 2005-66 deadline.
Those deadlines are discussed below.

Modified Amendment Deadlines
Section IV of Notice 2005-95 modifies certain amendment deadlines prescribed by guidance issued prior to Rev. Proc. 2005-66.

Retroactive Annuity Starting Dates
Final regulations under Code Section 417(e) were issued on July 16, 2003. The final regulations apply to plan years beginning on or after January 1, 2004. If a plan included a retroactive annuity starting date, Rev. Proc. 2005-66 required corrective amendments by the later of (1) the employer’s tax return due date (including extensions) for the tax year that included January 1, 2004, or (2) December 31, 2004. If a sponsor wants to amend a plan to add a retroactive annuity starting date (a discretionary amendment), the deadline under Rev. Proc. 2005-66 is the last day of the plan year in which the
change is implemented.

Notice 2005-95 modifies the deadlines for required and discretionary amendments to be the later of the deadline under Rev. Proc. 2005-66 or December 31, 2005.

Automatic Rollover Rules
The DOL issued final regulations requiring automatic rollovers of certain balances, effective for distributions made on or after March 28, 2005. Notice 2005-5 required plans (other than governmental or non-electing church plans) to be amended by the end of the first plan year beginning on or after March 28, 2005. Under Rev. Proc. 2005-66, the amendment deadline would be the later of (1) the employer’s tax return due date
(including extensions) for the year that includes March 28, 2005, or (2) the last day of the plan year that includes March 28, 2005.

To eliminate confusion, Notice 2005-95 clarifies that the earliest possible deadline to adopt automatic rollover amendments is December 31, 2005. The modified deadline for
amendments is the latest of (1) December 31, 2005; (2) the last day of the plan year that includes March 28, 2005; or (3) the employer’s tax return due date (including extensions) for the year that includes March 28, 2005.

Final 401(k) and 401(m) Regulations
Final 401(k) and 401(m) regulations are generally effective for plan years beginning on or after January 1, 2006. Plan sponsors are permitted to apply the new regulations for plan years ending after December 29, 2004.

Under Rev. Proc. 2005-66, a plan sponsor that wishes to apply the final regulations prior to the general effective date (a discretionary amendment) must amend no later than the last day of the plan year in which the changes are implemented. Notice 2005-95 modifies this deadline to require adoption of amendments by the later of December 31, 2005 or the last day of the plan year in which the change is implemented. This transition
rule does not override the existing requirement that 401(k) plans must be amended prior to the first day of the plan year to convert to a safe harbor design.

Relief for 2006 Safe Harbor Notices
In addition, for plan years beginning prior to 2007, safe harbor 401(k) plans will not be treated as failing to satisfy Code Section 401(k)(12)(D) merely because the safe harbor notice cross references the summary plan description as permitted under Notice 2000-3, Q&A-8. Notice 2000-3 permitted safe harbor notices to cross reference the summary plan description provisions regarding plan vesting and distributions. The final 401(k) regulations do not permit such cross referencing.

Specific Deadlines That Supersede Rev. Proc. 2005-66 Deadlines
Section V of Notice 2005-95 lists certain amendment deadlines that supersede the general rules prescribed in Rev. Proc. 2005- 66.

Required Minimum Distributions for Defined Benefit Plans
Rev. Proc. 2003-10 postponed the deadline for defined benefit plan amendments to comply with final and temporary regulations under Code Section 401(a)(9) until the end of the EGTRRA Remedial Amendment Period. Notice 2001-42 provided that the EGTRRA Remedial Amendment Period will not end earlier than the last day of the first plan year beginning on or after January 1, 2005.

Rev. Proc. 2005-66, sections 12 and 18, extended the EGTRRA Remedial Amendment Period for individually designed plans to the end of the initial five-year remedial amendment cycle. It extended the EGTRRA Remedial Amendment Period for pre-approved plans to the end of the initial sixyear cycle. Accordingly, Notice 2005-95 clarifies that defined benefit plans must be amended to comply with final required minimum distribution rules by the end of the applicable initial five- or six-year remedial amendment cycle.

Suspension of Benefit Amendments
The Supreme Court ruled in Central Laborers Pension Fund v. Heinz that ERISA Section 204(g) prohibits plan amendments from expanding the categories of post-retirement employment that result in the suspension of accrued early retirement benefits. Rev. Proc. 2005-23 (as modified by Rev. Proc. 2005- 76) provided relief under Code Section 7805(b) for plans that were amended prior to June 7, 2004, to expand employment categories for suspension of benefits. Under that guidance, sponsors must adopt corrective amendments by the end of the EGTRRA Remedial Amendment Period.

As discussed above, Rev. Proc. 2005-66 extended the EGTRRA Remedial Amendment Period. Accordingly, Notice 2005-95 clarifies that affected plan sponsors must adopt corrective amendments no later than the last day of the extended EGTRRA Remedial Amendment Period.

Professional Employer Organizations
Rev. Proc. 2002-21 required defined contribution plans maintained by PEOs to be terminated or converted to multiple employer plans no later than 120 days after the first day of the first plan year beginning on or after January 1, 2003. This deadline has not been modified.

Rev. Proc. 2003-86 provided guidance for transitional amendments to PEO plans that were timely converted to multiple employer plans. These amendments are required by the end of the EGTRRA Remedial Amendment Period. Notice 2005-95 clarifies that the deadline for these amendments is the last day of the EGTRRA Remedial Amendment Period as extended by Rev. Proc. 2005-66.

The Pension Funding Equity Act
The Pension Funding Equity Act of 2004 was enacted on April 10, 2004. The Act amended Code Section 415(b)(2)(E)(ii), which changes the interest rate for adjusting benefits under 417(e) from 5% to 5 1/2%, effective for plan years beginning in 2004 and 2005. Under Act Section 101(c), the deadline to amend plans to comply with these changes is the last day of the first plan year beginning on or after January 1, 2006.

Hurricane Katrina Relief
The Katrina Emergency Tax Relief Act of 2005 (KETRA) provides tax relief for distributions made on or after August 28, 2005, to individuals residing in the disaster area who suffered an economic loss due to the hurricane. Conforming plan amendments (for plans other than governmental plans) under KETRA must be adopted by the last day of the first plan year beginning on or after January 1, 2007.

Announcement 2005-70 provides for hardship distributions and loans to individuals adversely affected by Hurricane Katrina. Plans that do not provide for loans or hardship
distributions described in the Notice must be amended to provide for loans or hardship distributions by the end of the first plan year beginning on or after December 31, 2005.

Other Amendment Issues

Designated Roth Contributions
Under Code Section 402A, 401(k) plans may offer designated Roth contributions in plan years beginning after December 31, 2005. This is a discretionary amendment, so the deadline to adopt plan amendments is the last day of the plan year in which the plan change is implemented. The IRS intends to issue a sample amendment for plan sponsors that wish to offer designated Roth contributions.

Good Faith Amendments
Notice 2005-5 included a sample amendment to comply with the automatic rollover rules. The Service does not currently intend to issue model or sample amendments for–

Therefore, plan sponsors must timely adopt good faith amendments reflecting these changes. The IRS may issue a sample amendment related to Hurricane Katrina relief.

Maintaining the Status of Pre-Approved Plans
Good faith plan amendments will not affect the pre-approved status of master and prototype or volume submitter plans. Master and prototype plans may be amended by the prototype sponsor (and by the adopting employer, if applicable) without causing the plans to fail to be master and prototype plans. Similarly, volume submitter plans may be amended by the sponsoring employer or practitioner if permitted under the plan terms. Such good faith amendments will not result in a loss of reliance on a favorable opinion, advisory or determination letter if an amendment causes the plan to fail to satisfy Code Section 401(a) and a remedial amendment is adopted within the applicable five- or six-year remedial amendment cycle.

Change in Form 5500-EZ Filing Requirement

Effective for calendar plan year 2005, filers of Form 5500-EZ will not be required to file any schedules or attachments (including the Schedule B). Filers are required to collect and retain completed and signed Schedules B and P, if applicable. Though the schedules need not be submitted, they will be processed (and not rejected) if submitted. Also, IRS sources have confirmed to ASPPA that filing a Form 5500-EZ without a Schedule P will nonetheless start the statute of limitation running on the plan filing. This eliminates a significant concern with regard to not filing the Schedule P. This change does not eliminate the requirement to both perform an annual valuation and maintain the minimum funding standard account for all plans subject to the minimum funding requirements of Code Section 412.

ASPPA asaps are published as an information service for subscribers. Articles are general in nature and are not a substitute for professional advice or opinion in a particular case.