Plan Allocations Must Comply with the Definite Written Program Requirement (Posted September 22, 2003) Technical Tip 105: The following question and answer were from the IRS Q&A Session at the 2002 ASPPA Annual Conference: Can you find/allocate profit sharing/employer discretionary contributions more frequent (i.e., quarterly) than annually even though your plan document allocation date is only annual? Response: The allocation must follow plan terms. Comment by the RLR&C ERISA Attorneys: The IRS response is consistent with its long-standing position that a qualified plan must operate in strict accordance with its written terms. This is commonly referred to as the "definite written program requirement," which the IRS describes in Reg. section 1.401-1(a)(2) as follows: "A qualified pension, profit-sharing, or stock bonus plan is a definite written program and arrangement which is communicated to the employees and which is established and maintained by an employer --- ..." A plan that fails to operate in accordance with its written terms can be corrected without IRS supervision under the Self-Correction Program (SCP). If, however, the plan does not meet the SCP eligibility requirements (i.e., because the failure is significant and it has been more than two plan years since it occurred), it can still correct its definite written program violation; however, to do so the plan sponsor must file an application under the voluntary correction with Service approval (VCP) program, and pay a fee based on the number of participants in the plan. View all Tips © 2012 Reish Luftman Reicher & Cohen, a Professional Corporation Important notice: Answers are provided as general guidance on the subjects covered in the question and are not provided as legal advice to the questioner's situation. Any legal issues should be reviewed by your legal counsel to apply the law to the particular facts of your situation.