Still VS?

[Guest dbvail]

We are reviewing a Volume Subitter plan that, effective 10/1/2005 added a sentance in the eligibility section that excluded one participant, by name, from that day forward.

I am concerned that this may be enough of a departure from the VS approved language as to have this considered an Individually Designed.

Any thoughts?

[WDIK]

I share your concern.

[Belgarath]

I agree with WDIK. See following from Revenue Procedure 2005-16.

SECTION 19. EMPLOYER RELIANCE

.01 Standardized M&P Plans - An employer adopting a standardized M&P plan may rely on that plan's opinion letter, except as provided in (1) through (3) and section 19.03 below, if the sponsor of such plan or plans has a currently valid favorable opinion letter, the employer has followed the terms of the plan(s), and the coverage and contributions or benefits under the plan(s) are not more favorable for highly compensated employees (as defined in §414(q)) than for other employees.

(1) An employer may not rely on an opinion letter for a standardized plan with respect to the requirements of §§415 and 416, without obtaining a determination letter, if the employer maintains at any time, or has maintained at any time, another plan, including a standardized plan, that was qualified or determined to be qualified covering some of the same participants. For this purpose, a plan that has been properly replaced by the adoption of a standardized plan is not considered another plan. The plan that has been replaced and the standardized plan must be of the same type (e.g., both defined benefit plans) in order for the employer to be able to rely on the standardized plan with respect to the requirements of §§415 and 416 without obtaining a determination letter. In addition, an employer that adopts a standardized defined contribution plan will not be considered to have maintained another plan merely because the employer has maintained another defined contribution plan(s), provided such other plan(s) has been terminated prior to the effective date of the standardized plan and no annual additions have been credited to the account of any participant under such other plan(s) as of any date within a limitation year of the standardized plan. Likewise, an employer that adopts a standardized defined contribution plan that is first effective on or after the effective date of the repeal of §415(e) will not be considered to have maintained another plan merely because the employer has maintained a defined benefit plan(s), provided the defined benefit plan(s) has been terminated prior to the effective date of the standardized defined contribution plan.

(2) An employer that has adopted a standardized defined benefit plan may rely on an opinion letter with respect to the requirements of §401(a)(26) only if the plan satisfies the requirements of §401(a)(26) with respect to its prior benefit structure or is deemed to satisfy §401(a)(26) under the regulations. However, an employer may request a determination letter if the employer wishes to have reliance as to whether the plan satisfies §401(a)(26) with respect to its prior benefit structure.

(3) An employer that adopts a standardized plan may not rely on an opinion letter with respect to: (a) whether the timing of any amendment to the plan (or series of amendments) satisfies the nondiscrimination requirements of §1.401(a)(4)-5(a), except with respect to plan amendments granting past service that meet the safe harbor described in §1.401(a)(4)-5(a)(3) and are not part of a pattern of amendments that significantly discriminates in favor of highly compensated employees; or (b) whether the plan satisfies the effective availability requirement of §1.401(a)(4)-4© with respect to any benefit, right, or feature. An employer that adopts a standardized plan as an amendment to a plan other than a standardized plan may not rely on an opinion letter with respect to whether a benefit, right, or feature that is prospectively eliminated satisfies the current availability requirements of §1.401(a)(4)-4 of the regulations. Such an employer may request a determination letter if the employer wishes to have reliance as to whether the prospectively eliminated benefit, right, or feature satisfies the current availability requirements.

.02 Nonstandardized M&P Plans and Volume Submitter Plans - An employer adopting a nonstandardized M&P or volume submitter plan may rely on that plan's opinion or advisory letter as described below if the employer's plan is identical to an approved M&P or specimen plan with a currently valid favorable opinion or advisory letter, the employer has chosen only options permitted under the terms of the approved plan, and the employer has followed the terms of the plan. Also see section 19.03(3) below. These employers can forego filing Form 5307 and rely on the plan's favorable opinion or advisory letter with respect to the qualification requirements, except as provided in section (1) through (4) and section 19.03 below.

(1) Except as provided in section 19.03(2), (3) and (4), adopting employers of nonstandardized M&P plans and volume submitter plans may not rely on a favorable opinion or advisory letter with respect to the requirements of:

(a) §§401(a)(4), 401(a)(26), 401(l), 410(b) or 414(s); or

(b) if the employer maintains or has ever maintained another plan covering some of the same participants, §§415 or 416.

For this purpose, whether an employer maintains or has ever maintained another plan will be determined using principles consistent with section 19.01 above.

(2) Adopting employers of nonstandardized M&P plans and volume submitter plans may rely on the opinion or advisory letter with respect to the requirements of §§410(b) and 401(a)(26) (other than the §401(a)(26) requirements that apply to a prior benefit structure) if 100 percent of all nonexcludable employees benefit under the plan.

(3) Nonstandardized M&P plans must give adopting employers the option to elect a safe harbor allocation or benefit formula and a safe harbor compensation definition. Adopting employers of nonstandardized M&P plans that elect a safe harbor allocation or benefit formula and a safe harbor compensation definition may rely on an opinion letter with respect to the nondiscriminatory amounts requirement under §401(a)(4). Adopting employers of nonstandardized M&P plans that are §401(k) and/or §401(m) plans may rely on an opinion letter with respect to whether the form of the plan satisfies the actual deferral percentage test of §401(k)(3) or the actual contribution percentage test of §401(m)(2) if the employer elects to use a safe harbor definition of compensation in the test. Adopting employers of nonstandardized M&P plans described in §401(k)(11) and/or §401(m)(12) may rely on an opinion letter with respect to whether the form of the plan satisfies these requirements unless the plan provides for the safe harbor contribution to be made under another plan.

(4) A VS plan may give an adopting employer the ability to select an allocation formula for the employer non-elective contribution which satisfies one of the designbased safe harbors in §1.401(a)(4)-2(b)(2) or a benefit formula which satisfies one of the design-based safe harbors under §1.401(a)(4)-3(b)(3), (4), or (5), and the ability to select a safe harbor compensation definition for such formula which satisfies §1.414(s)-1©. If the adopting employer selects (utilizes) such formula and compensation definition, then the adopting employer may rely on an advisory letter with respect to the nondiscriminatory amounts requirement under §401(a)(4).

.03 Other Limitations and Conditions on Reliance - The following conditions and limitations apply with respect to both M&P and VS plans:

(1) An adopting employer can rely on a favorable opinion or advisory letter for a plan that amends or restates a plan of the employer only if the plan that is being amended or restated was qualified.

(2) An adopting employer has no reliance if the employer's adoption of the plan precedes the issuance of an opinion or advisory letter for the plan.

(3) An adopting employer can rely on an opinion or advisory letter only if the requirements of this section 19 are met, and the employer's plan is identical to an approved M&P or specimen plan with a currently valid favorable opinion or advisory letter; that is, the employer has not added any terms to the approved M&P or VS plan and has not modified or deleted any terms of the plan other than choosing options permitted under the plan or, in the case of an M&P plan, amended the document as permitted under section 5.06 or 5.09 or, in the case of a VS plan, modified the document as permitted under sections 14 and 15. Thus, for example, in the case of a VS plan, the employer's plan must be identical to the approved specimen plan except as the result of the employer's selection among options that are permitted under the terms of the approved specimen plan and modifications permitted under sections 14 and 15.

(4) An employer's plan will not fail to be identical to an approved M&P or specimen plan merely because the employer modifies or amends the plan to:

(a) Add or change a provision and/or to specify or change the effective date of a provision, provided the employer is permitted to make the modification or amendment under the terms of the approved M&P or specimen plan as well as under §401(a), and, except for the effective date, the provision is identical to a provision in the approved plan. Thus, an employer is not required to restate its M&P or volume submitter plan in order to change options under the plan or to specify different effective dates. Also see section 5.02, which limits an employer's ability to amend an M&P plan without causing the plan to be treated as an individually designed plan, and section 5.11, which requires the employer to complete a new signature page when the employer changes options in an M&P adoption agreement.

(b) Correct obvious and unambiguous typographical errors and/or crossreferences that merely correct a reference but that do not in any way change the original intended meaning of the provisions. No such changes may affect any qualification requirements of the plan. The Service in its discretion may determine that any such changes are not considered identical.

© Adopt model, sample or other required good faith amendments that specifically provide that their adoption by an adopter of a VS and or M&P plan will not cause the plan to be treated as an individually designed plan or cause the plan to fail to be "identical" to the approved M&P or specimen plan within the meaning of this section.

(5) An adopting employer cannot rely on an opinion or advisory letter if the adopting employer has modified the terms of the plan's approved trust in a manner that would cause the plan to fail to be qualified.

.04 Reliance Equivalent to Determination Letter - If an employer can rely on a favorable opinion or advisory letter pursuant to this section, the opinion or advisory letter shall be equivalent to a favorable determination letter. For example, the favorable opinion or advisory letter shall be treated as a favorable determination letter for purposes of section 21 of Rev. Proc. 2005-6, regarding the effect of a determination letter, and section 5.01(4) of Rev. Proc. 2003-44, regarding the definition of "favorable letter" for purposes of the Employee Plans Compliance Resolution System. Of course, the extent of the employer's reliance may be limited, as provided above.

[Blinky the 3-eyed Fish]

It's not a word-for-word adopter and cannot rely on the opinion letter but it's not individually designed. The plan would need to be submitted to the IRS for a FDR to have reliance but would still use a 5307 when submitting.

[Mike Preston]

Which the IRS could bounce to 5300 if it felt like it.

[Blinky the 3-eyed Fish]

But they wouldn't for sure because it's just one minor mod to a VS document.

[Mike Preston]

From your keyboard to their reactionaries' ears.

[Guest dbvail]

Youse guys is great!

Thanks