Frozen DBs Still Need to be Amended for Law Changes

September 26, 2013 ( – Just as with active plans, a frozen defined benefit (DB) plan must comply with the requirements of Internal Revenue Code (IRC) Section 401(a) to retain its tax-qualified status.

If plan sponsors fail to amend their frozen plans for current law by the required deadlines, their plans could become disqualified, the Internal Revenue Service (IRS) warned in its recent Employee Plans News newsletter.

During the Frozen Plan Amendments project, the Employee Plans Compliance Unit looked at whether sponsors of frozen defined benefit plans had amended their plans for the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA). Plan sponsors who adopted pre-approved plans had until April 30, 2012, to adopt their EGTRRA plan restatement, and sponsors of individually designed plans should have amended for EGTRRA during their five-year remedial amendment cycle, which is generally based on the last digit of their employer identification number (EIN).

Additionally, special rules and annual testing requirements for the minimum coverage and participation requirements of IRC Sections 410(b) and 401(a)(26) and nondiscrimination apply to frozen plans.

Overall, the agency found sponsors of the sampled frozen defined benefit plans amended their plans for current law by the required deadlines. However, it found other issues:

  • Incorrect pension feature code listed on Form 5500 – Some sponsors selected pension feature code 1I, frozen defined benefit plan, when their plan was a defined contribution (DC) plan, and some sponsors selected pension feature code 1I, frozen defined benefit plan, when their plan was not frozen;
  • Form 5500 filed incorrectly – Some SEP (simplified employer pension) plan sponsors filed a Form 5500 series return. SEP plans do not have a Form 5500 filing requirement;
  • No Form 5500 filed – A few sponsors did not file a Form 5500. Being frozen does not eliminate the Form 5500 filing requirement. A frozen plan is not a terminated plan; and
  • Employer no longer in existence – In a few cases, the sponsoring corporation dissolved or the self-employed owner retired or died, but the assets remained in the trust. A qualified plan needs a sponsoring employer.


The IRS recommended that benefits professionals and their plan sponsor clients discuss the differences between active, frozen and terminated plans.

In addition, the agency suggested plan sponsors review their frozen defined benefit plans to see if they:

  • Still have a valid reason for keeping the plan frozen;
  • Have filed Form 5500 for the plan by the filing deadline;
  • Used the correct pension feature code on Form 5500; and
  • Amended the plan for current law by the required deadline.


If plan sponsors missed the deadline to amend their plans for EGTRRA, EGTRRA good-faith amendments, interim amendments, or amendments required to implement optional tax law changes, they may be able to correct this failure through the IRS’ Voluntary Correction Program.

Questions about frozen defined benefit plans may be emailed to the IRS at