Pension plans: remedial amendment period for GUST.

• Author: Moore, Philip E.
• Position: Qualification requirements of retirement plans

Since 1994, Congress has enacted various laws, making changes that have affected the qualification requirements of retirement plans. The laws and their respective provisions have been collectively referred to as GUST. The following list presents the laws and some of the pension plan changes:

* The Uruguay Round Agreements Act (GATT), enacted on Dec. 8, 1994, changed several Code sections, including rules to determine the present value of a participant's benefits for plan distributions.

* The Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA), enacted on Oct. 13, 1994, codified, revised and restated the Federal law that protects veterans' reemployment rights.

* The Small Business Job Protection Act of 1996 (SBJPA), enacted on Aug. 20, 1996, changed the definition of "highly compensated" under Sec. 414(q), the nondiscrimination tests under Sec. 401(k) and (m) and the distribution requirement under Secs. 401(a)(9), and repealed the family aggregation rules under Secs. 401(a)(17) and 414(q). The SBJPA also added Sec. 414(u) so that a plan complying with USERRA would not violate the qualification requirements of Sec. 401(a).

* The Taxpayer Relief Act of 1997 (TRA '97), enacted Aug. 5, 1997, increased a plan participant's involuntary cash-out from $3,500 to $5,000, as long as the present value of the participant's nonforfeitable accrued benefit is not above the limit.

* The Internal Revenue Service Restructuring and Reform Act of 1998 (IRSRRA '98), enacted on July 22, 1998, contained a provision changing the direct rollover requirement under Sec. 401(a)(31).

Rev. Procs. 97-41, 98-14, 99-23, 2000-20 and 2000-27 extended the "remedial amendment period" for the GUST amendments for nongovernmental plans until the last day of the first plan year beginning after 2000. Therefore, for a calendar-year plan beginning on January 1, a taxpayer has until Dec. 31, 2001 to amend the plan in light of the GUST amendments.

Sec. 401(b) and the related regulations provide for a remedial amendment period during which, under certain circumstances, a taxpayer may amend a plan retroactively to comply with the Code's requirements. In general, remedial amendments are accepted if (1) the amendments, when adopted retroactively, conform the plan as of the statutory effective dates and (2) the plan operates in conformance with the changes during the interim period.

For a new plan, the remedial amendment period would begin on the date the plan is put...