Prototype Documents

[Archimage]

Correct me if I am wrong but doesn't any changes to the language of a prototype cause the document to become individually designed or are there exceptions?

[pmacduff]

Archimage - I agree because then isn't it that the document is no longer considered to be "word for word"...anyone else?

[Mike Preston]

There are no exceptions when dealing with a prototype.

"Word-for-word" is reserved for discussing volume submitter plans, not prototype plans. A volume submitter plan can be modified and no longer satisfy the defintion of "word-for-word" but can still be accepted as a volume submitter plan by the IRS. Upon submission of a non-word-for-word document, the modifications are identified to the IRS and, if the IRS deems them non-substantial, then the submission is allowed to proceed on the basis of it being a volume submitter. If the IRS deems the changes to be something other than non-substantial they require that the submission proceed as if it were an individually designed plan.

[pmacduff]

Sorry Mike - I don't do documents and we use the VS type - but I guess we agree - no changes to prototypes....

[Mike Preston]

Not a problem. It is a confusing area.

[g8r]

There are a few limited exceptions that apply to prototypes.

Some that come to mind: You can add overriding language to coordinate 2 plans for the top-heavy minimums; You can add overriding language to ensure that no 411(d)(6) protected benefits are eliminated, and for non-standardized plans, you can make changes to the trust or custodial provisions.

I can't think of any other changes that are permitted.

[Mike Preston]

I was not aware that you could make changes to the trust or custodial arrangements. I'll take your word for it since I've never made any changes in those areas. Thanks.

[Belgarath]

q8r - can you cite some regulation/authority for allowing this?

[WDIK]

You can add overriding language to coordinate 2 plans for the top-heavy minimums;

The prototypes I am familiar with allow for additional language to be inserted for this purpose. Are these technically considered changes to the plan?

My question is really irrelevant, since I agree this can be done, but I am curious.

[Belgarath]

Maybe I should clarify my question. The prototypes I'm familiar with generally have an "other" election in these areas which is essentially a fill in the blank. And likely this is what q8r is referring to. I was asking in the case where a prototype document does NOT have such an option - is there authority for inserting it? Thanks!

[g8r]

What I'm referring to are changes permitted to the plan even though there is no "other" option in the approved prototype. Although, the IRS is supposed to require that there be an "other" for the 417 coordination.

The change to the trust/custodial agreement and the 417 override is found in Rev. Proc. 2000-20. Below is Section 5.11 of that rev. proc. dealing with changes to the trust/custodial provisions.

The addition of 411(d)(6) language is actually found in the LRMs. I don't have the specific LRM #, but in the section dealing with plan amendments, there is a note to the reviewer stating the addition of 411(d)(6) protected benefits is not considered an amendment that destroys prototype status.

As far as reliance, the rules (e.g., Announcement 2001-77 and the later Rev. Procs) specifically refer to 5.11 below so you're safe with that, as well as the 417 override (but have reliance on everything other than the changes you make). It's not clear about the 411(d)(6) attachments although some prototypes specifically include language permitting this so arguably you would still have reliance.

There is an old IRS newsletter stating that the use of "other" options does not destroy reliance assuming you follow the parameters associated with the "other" selection.

5.11 Adopting Employer Modification of Trust or Custodial Account Document - An

employer that adopts an M&P plan other than a standardized plan (or paired plans) will not be considered to have an individually designed plan merely because the employer amends administrative provisions of the trust or custodial account document (such as provisions relating to investments and the duties of trustees), provided the amended provisions are not in conflict with any other provision of the plan and do not cause the plan to fail to qualify under § 401(a). For this purpose, an amendment includes modification of the language of the trust or custodial account document and the addition of overriding language. An employer that adopts a standardized M&P plan may amend the trust or custodial account document provided such amendment merely involves the specification of the names of the plan, employer, trustee or custodian, plan administrator and other fiduciaries, the trust year, or the name of any pooled trust in which the plan’s trust will participate.