Paul Shultz, Director, EP Ruling and Agreements, issued technical assistance on the effect of a GUST plan restatement on a previously adopted EGTRRA good-faith amendment. In Notice 2001-42, the IRS provided that EGTRRA good-faith amendments needed to be adopted by the end of the GUST remedial amendment period. However, EGTRRA did not contain any exceptions to the anti-cutback rules of IRC § 411(d)(6). Therefore, many plan sponsors amended their plans for EGTRRA prior to the time their plans were updated for GUST. Many prototype plan sponsors adopted the EGTRRA amendment for their pre-GUST (TRA 86) prototype plans in order to assist adopting employers in avoiding these anti-cutback issues.

When those plan sponsors restated their plans for GUST, many did not also re-execute the EGTRRA good-faith amendment. Generally, a plan restatement supercedes all prior versions of the plan, including all previous amendments, as of the effective date of the restatement. However, there may be situations where it is not clear whether a GUST restatement actually was intended to restate the entire plan (i.e., whether it was intended to replace a previously adopted EGTRRA good-faith amendment). As stated in the advice, this is particularly true where a GUST restatement has a retroactive effective date that precedes the previously adopted EGTRRA plan amendment. In general, unless there are other facts that lead to a contrary conclusion, the failure to re-adopt the EGTRRA amendment after the restatement does not show evidence that the plan sponsor intended to supersede the EGTRRA good-faith amendment. Rather, the continued operation of a plan in accordance with EGTRRA is evidence that the restatement was not meant to supersede the amendment.

The IRS has concluded that a GUST plan restatement should not be treated by IRS as superseding a previously adopted EGTRRA plan amendment that is not incorporated or reflected in the restatement, provided the plan is operated in a manner consistent with the EGTRRA plan amendment. In other words, while it is advisable to adopt the EGTRRA amendment as part of an employer’s GUST restatement, the failure to adopt the EGTRRA amendment in a subsequent GUST restatement does not invalidate a prior adoption of the EGTRRA amendment. IRS reviewers have also been instructed to deem a plan to be operated in accordance with EGTRRA if the operation of the plan cannot be determined (such as where a determination letter application was only requested on the form of the plan).

The guidance in the technical assistance memo applies for all purposes, including the determination of plan qualification, funding requirements, and deductions. However, it should be noted that the guidance only refers to GUST restatements. It does not address the restatement of a plan for any other purpose. While it is likely the same conclusion would be reached for any other restatement, it would be prudent to re-adopt the EGTRRA good-faith amendment (including any elections the employer may have made with respect to available EGTRRA amendment options) when a plan is restated, or alternatively, indicate in the adopting resolution that the EGTRRA amendment is not being superseded by the restatement of the plan. Furthermore, any GUST prototype plan sponsor that adopted the EGTRRA amendment for its pre-GUST prototype prior to the approval of its GUST prototype should review its records to ensure that it also adopted the EGTRRA amendment at the sponsor level for its GUST prototype.