EGTRRA Amendments May be Required by December 31, 2002

11/27/2002

The Internal Revenue Service previously announced that in order for qualified retirement plans to be in compliance with the requirements of the Economic Growth and Tax Relief Reconciliation Act of 2001 (“EGTRRA”), those plans must make the necessary good faith amendments by the later of (i) the last day of the plan year in which the EGTRRA changes apply, or (ii) the end of the GUST remedial amendment period for the plan.  For most plans, the EGTRRA changes apply for the 2002 plan year.

Many qualified plans have already adopted EGTRRA good faith amendments; others do not have to adopt those amendments until the GUST remedial amendment period expires, which in many cases will be after the end of the 2002 plan year. However, certain plans which have not yet adopted their EGTRRA amendments should adopt some of the EGTRRA changes before the end of the 2002 Plan Year.  For calendar year plans, that deadline is December 31, 2002.

Generally, you will be required to adopt certain EGTRRA provisions before the end of the 2002 plan year if those amendments are necessary to avoid a decrease or elimination of benefits protected by Section 411(d)(6) of the Internal Revenue Code—the so-called “anti-cutback provision”. The anti-cutback provision would apply if there is a potential that your retirement plan will be top-heavy for the 2002 plan year, and/or (ii) you intend to make a profit sharing contribution to your retirement plan in a fixed dollar amount that will be allocated on the basis of participants’ compensation, and you wish to raise the compensation limit in your plan to $200,000.

If you have any questions about possible required amendments to your plan or about EGTRRA generally, please call any of the attorneys listed above.

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