Retirement Plans FAQs regarding the amendments required to comply with the Community Renewal Tax Relief Act of 2000 (CRA)
These frequently asked questions and answers provide general information and should not be cited as any type of legal authority. They provide the user with information responsive to general inquiries. Because these answers do not apply to every situation, yours may require additional research.
- Which specific Code sections were amended by CRA?
- Are other Code sections impacted by CRA?
- What years are affected by CRA?
- What is the deadline to amend for CRA?
- How can I amend my plan for CRA?
- Do I need to amend my plan for CRA, even if I don't currently maintain a qualified transportation fringe benefit plan?
Which specific Code sections were amended by CRA?
Section 415(c)(3), which defines compensation used in applying the limitations of section 415, and section 414(s)(2), which allows an employer to exclude certain deferral contributions from plan compensation for nondiscrimination testing, were amended to include elective reductions in compensation for qualified transportation fringe benefits that are excluded from an employee's gross income by reason of section 132(f)(4).
Are other Code sections impacted by CRA?
Absolutely. The determinations of 1) who is a highly compensated employee under section 414(q), 2) the minimum contributions or benefits for top-heavy plans required by section 416(c), and 3) who is a key employee under section 416(i)(1) are all made using the definition of compensation under section 415(c)(3). The definition of compensation under 414(s) is used for nondiscrimination testing under section 401(k) and 401(m) as well as under section 401(a)(4). (Note that a plan that incorporates section 414(s) by reference, except for an election to exclude deferral contributions described in section 414(s)(2), will no longer meet the criteria for a safe harbor definition of compensation under section 1.414(s)-1(c)(3) of the Income Tax Regulations unless the plan is amended to exclude elective reductions for qualified transportation fringe benefits. If no amendment is made, plan compensation will have to be tested for nondiscrimination using Demo 9.)
What years are affected by CRA?
CRA is effective for years beginning after December 31, 1997. Pursuant to Notice 2001-37, 2001-25 I.R.B. 1340, qualified plans must be operated in accordance with CRA for plan and limitation years beginning on or after January 1, 2001. Any amendments to comply with CRA must be made effective no later than the earlier of: 1) the first days of the plan and limitation years after 1997 in which the plan was operated in accordance with CRA, or 2) the first days of the plan and limitation years beginning in 2001. A plan cannot be amended retroactively for CRA for years after 1997 unless the plan was operated in accordance with CRA during those years.
What is the deadline to amend for CRA?
The end of the GUST remedial amendment period for your plan, including any extensions available under Rev. Proc. 2001-55, 2001-49 I.R.B. 551.
How can I amend my plan for CRA?
It's easy - if you use the model amendments contained in the appendix to Notice 2001-37. If you have adopted an individually designed or volume submitter plan, the amendments can be used as needed to amend your plan for CRA changes to sections 414(s) and 415. You will not lose reliance on a determination letter currently in effect if you adopt the amendments on a word-for-word basis.
If you are a practitioner who sponsors a volume submitter plan, you can incorporate the amendments into your specimen plan document without affecting your advisory letter. If you sponsor a master or prototype plan, you can provide the amendments to each adopting employer as a supplement to their approved adoption agreement.
Employers and sponsors of volume submitter and master & prototype plans should be aware that the Service will not issue a new determination, advisory or opinion letter solely for the model amendments.
Do I need to amend my plan for CRA, even if I don't currently maintain a qualified transportation fringe benefit plan?
Yes. Because determination letters are issued for the form of the plan, the plan must be amended for the CRA changes to ensure that it will remain qualified in form, even if the sponsoring employer later decides to offer qualified transportation fringe benefits.