Using Corrective Amendments to Preserve Cross-tested Allocations Determined Before Year End (Posted October 4, 2005) Technical Tip 150: The following question and answer were from the IRS Q&A Session at the 2004 ASPPA Annual Conference: An employer with a cross tested profit sharing plan receives a contribution projection/allocation estimate approximately two months prior to its year end and approves the recommendation. After that date but before the year end, a NHCE participant quits. The plan has a last day employment provision. When the new contribution calculation is completed after year end, significant adjustments in allocations are required to pass non-discrimination tests now that the terminated employee is excluded. Can a -11(g) amendment be adopted to provide the terminated employee (who is already 100% vested) with the same contribution that he would have gotten had he not terminated, thus passing the non-discrimination tests? Response: YES, so long as the -11(g) amendment is non-discriminatory and meets the meaningful benefit rule. Reg 1.401(a)(4)-11(g)(2) specifically includes the language: ,,, "a corrective amendment ... may grant accruals or allocations to individuals who did not benefit under the plan during the plan year being corrected." Since this participant is a vested NHCE, a -11(g) amendment that adds him back and gives him an allocation that allows the non-discrimination test to pass (the amount does not have to be what he would have received if he had not terminated) would be acceptable under the regs. 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.